This 6 hour chart shows the futures with a higher low on the MACD's so positive divergence is forming. But I don't think the low is "in" yet, even with this mornings large drop. I think we'll see the low tomorrow on a flush out day, with the futures in the 2600's, maybe even below it a little? This is clearly some kind of C wave down and if "C equals A" then it's a 203 point drop (A was 2935-2732).

With a B wave high of 2834 this C down will have to reach 2631 to equal the A down. That's quite a bit more down from this mornings low, so I wouldn't be in too much of a hurry to hop on the bull just yet. I'm sure we'll get some bounces but who knows how much they will be and for me the risk of trying to play them isn't worth it. But after the market hits the 2630's I'll be looking closely for a bottom to go long at. It might stop there or go deeper, hard too know for sure?

I'd look for a bounce at the prior low from the 11th, which was 270.36 on the SPY (it's already below on the futures), but I'm not playing it. I'm waiting for a minimum of the 2630's to be hit, but I expect a little lower to really flush out the bulls. This C wave down will likely subdivide into a 5 wave down pattern and the wave 4 up on it is many times the tricky one to lure in some bulls, so if it happens today don't get sucked into thinking the low is "in" as odds suggests it's just a wave 4 up bounce and another wave down (the 5th wave) will revisit the low again and/or pierce through it to go lower.

This down move could be over with tomorrow or might extend into Thursday/Friday... hard to say. Generally speaking though I'd look for tomorrow to end it so they can rally the market back up hard into Fridays close to save the "weekly close" at a level where the market doesn't look ready to collapse. Meaning they want save the rising trendline that started at the 1810 SPX low in February of 2016, and the 50 period moving average. It's a MAJOR level that around the 2750 SPX zone right now. So bottoming this Friday isn't likely as that would kill that weekly chart close. My guess is that we bottom tomorrow on some flush out to at least the 2630's (possibly a break of 2600 to scare everyone) and then rally hard up into Friday to recapture that 2750 level for the weekly close. Best of luck to everyone.

P.S.  There's an FOMC meeting tomorrow so a low going into the meeting around 2pm EST and strong rally afterwards would not surprise me.

CORRECTION:  There's no meeting this week.  Next meeting is November 7-8th.

The futures are up some this morning from being down Sunday night. Overall they are basically about where they closed on Friday. So a flat to slightly up open on the SPY appears likely. Everything look bearish as far as I can tell. In fact it looks like are are setting up for another big drop that could happen today, tomorrow or Wednesday. My guess it that it's finished by Wednesday and another 100 points lower on the SPX. As the old saying goes... if it walks like a duck, quacks like a duck, and looks like a duck, then it must be a duck.

The current setup in the market looks like a wave 3 (or C) down, is in the month of October going into the most bearish week, has negative divergences everywhere, is stuck below falling trendlines of resistance, is under moving averages with a "head and shoulders" pattern, so it must be a bear. Today could be the last day for the bulls before the big drops happen, but all it not dead for them as I'd fully expect a very strong rally back up to follow after this big drop finishes this Wednesday or Thursday.

The move down should complete an ABC down from the 2940 all time high, which appears to be just a larger wave 1 down of some degree. Then a strong wave 2 up into the elections should follow. From there it gets tricky as if this wave 2 up continues after the elections then it will then be labeled wrong as a new all time high would suggest the move up from the low this week would be a wave 5 to 3000+ on the SPX.

Personally, I don't see it that way. I think the top is in, but many others think that after this ABC down is done we are off to the race back up in a wave 5 (the ABC down would be a wave 4 of course). I'll just play this day by day as I don't have a crystal ball nor a time machine (wish I did though... LOL). Anyway, for today I'm looking for this open to fade as the day goes on and for the market to start down into a nasty drop for an estimated Wednesday or Thursday low.

After the close yesterday we had a "possible" FP showing 279.25 on the SPY, which is right around the opening level, so it might just be a late fill... not sure? But if we continue to grind up higher all day to pin the SPY somewhere I'd have to think that would be the likely target. But early next week should be down as the bounce rally from the 2710 SPX looks complete at Wednesdays high of 2817, which suggests we are in a C wave down of some degree as that bounce was the B up and the A down was from the all time high of 2940 to the 2710 low.

That's about a 230 point drop on that A wave and 107 point rally on the B wave. From here the next wave down should at least match the A wave according to Elliottwave Theory. So 230 down from 2817 is 2587 SPX, which is close to the point value drop I calculated from a FP I have (it's on my FP's Page of my site). Today's bounce back up in the futures from the nasty sell off yesterday looks like a wave 2 up of the C down with the wave 1 down happening yesterday. My guess is that they grind up all day and close around that FP from yesterdays close and end the wave 2 up of C down. That's setups Monday for the wave 3 down of C down to start.

Of course if this count is wrong the B up didn't end at 2817 on Wednesday then we should go a little higher on Monday to end it... like maybe 2820-2830? But I wouldn't bet on that happening. Certainly it's possible but to go up a little more on Monday and then start another big move down (it would then reset the C down and be starting with the wave 1 of C again) doesn't seem logically from a "trickery" standpoint... and we know that SkyNet loves to trick bears and bulls alike. I'm thinking a nice rally up into that 279.25 area at the close would have bears scared to short over the weekend as it would have almost completely erased yesterdays drop... which makes bears wonder if it's just gearing up to go much higher. However, it's possible they wait until Monday to hit that "possible" FP on the SPY... either way it's likely just the wave 2 up inside C down an is a great short in my opinion. Have a great weekend everyone.

Today is likely going to be the last day for this up move before we rollover and retest the 2710 SPX lows... which I think will break and we'll go lower. How low I don't know? But I'm looking for a top for this bounce today or tomorrow, with today being the preferred day. I'm thinking we'll get into the 2820-2830 area and then that's it for this bounce. While it should happen today it could drag out into Friday as that's the monthly options expiration and market makers love to "pin" the SPY where the most puts expire worthless.

After this move is over with early next week (should be 2-4 days in total) I suspect they will run the market back up into the midterm elections early November. We know they don't want people focused on the stock market while voting for new (or old) Congressmen and Senators. After the election though I'd look out below as November is going to be a very ugly month for the bulls. Bears should be feasting during that month, and it doesn't matter what the outcome is for the elections.

It's all in the charts and they all point to lower levels before this year ends. Big picture... I think we are starting a bear market. It's the first one since the 2007-2009 market. Yeah, we've had some pullbacks and some flash crashes between then and now but that was all during a bull market. Everything now suggests we are entering a bear market. So bounces might be fast and fierce but they should also be reversed back down shortly afterwards. This is only the first bounce of many to come and it's just about time for it to end. We'll see if it happens today or tomorrow but today has better odds I think. For today I see weakness early on followed by strength late in the day. If we close up near that topping zone I posted I think that's all she wrote the bulls and I'd expect Friday to start the next leg down.

Looking at the futures Sunday night until now they have been down some but have recovered some too... so basically they are basically just chopping around with no clear direction. Earnings season starts this week so we could get some more wild swings. But my thoughts are more toward the FOMC this Wednesday as I tend to think we'll rally up some into the meeting, then start back down again later in the week.

Possibly a top on the bounce Wednesday, down on Thursday and back up on Friday? It probably going to be a choppy week as a much needed bounce tries to get going to the upside. I don't know how much to expect as overall the market is still got a lot more downside coming, but "if" they get a squeeze going then it might surprise a lot of bears with a move up as high as the 2850-2880 SPX area.

I'm not expecting it or suggesting and longs but it's certainly possible if the bulls get that squeeze going. But this market is not bottomed by any means so another drop low is coming... just the "when" part is tough to answer. The VIX is at horizontal support and touching a moving average too, so I'm still 50/50 on whether we drop one more time early this week to a slightly lower level and then rally up hard for the bounce, or if we grind up first and drop later. But based on time the best odds (so far) for a top and turn back down is on Tuesday at the close or possibly some time Wednesday around that FOMC period.

I doubt if they will add anything to the prior meetings minutes that will scare the market but just saying nothing could also be bad as I'm sure it's used too being saved by them like they have have so many times in the past. So if we rally hard today, Tuesday and into Wednesday then I'd say we'll start down again afterwards. If we fail to rally then odds will lean toward another drop lower to finally flush out the last bull.

I see no positive divergence anywhere so until that lower low is done the rallies are going to be tough. Only a short squeeze could create a good one, and I'm not sure too many bears would bail? We'll see I guess. For me I don't see any high odds trade so I'm on the sidelines until I see that flush out to go long at for a strong bounce (with positive divergence) or a nice rally to short at.

Looks like we bottomed yesterday for the first series of waves down as the futures are bouncing back nicely this morning. Overall it's still a downtrend from the all time high but there should be several days of bouncing to work off the extremely oversold conditions. But there's no positive divergence yet on the daily chart of the SPX/SPY so more downside is very likely still coming. Since we are in un-charted waters it's really hard for me to make predictions on how high this bounce is going to be, or how long it will last... so I'll just point out some resistance areas.

On this daily SPY chart the prior high from January of 282.93 stands out as an obvious resistance point. The 277 area where the market topped on June 13th is a much closer one as that about where the premarket is at this morning. So, to sum it up I'm expecting 2-3 days of bouncing to make a bear flag on the daily chart and then more down. I don't really have an upside target as this first bounce is likely to be the weak one as there's NO capitulation yet in the market. Once we get it though I'd expect a week or two of a bounce.

Every day that goes by weakens the bulls bounce chances, and today might just be the last chance for a decent bounce from them. Why you ask? Because this sideways action is making a bear flag on the daily chart and just working off short term oversold conditions... which means another drop is setting up. The "when" part is tough to pin down exactly but it's looking like it won't be more then another day or so, like by the end of this week. So I must admit I'm a little shocked that the bulls didn't rally this back up by now. It's a sign of a change in trend from bullish to bearish... at least for the medium term (days to weeks).

So if today doesn't produce the rally up into the 290's on the SPY I'm going to close out my small long position and look for shorts again. This bull bounce is running out of time and the bears are waiting to pounce again. For the short term it's looking like a gap down at the open is most likely, which means that if they repeat the pattern of the last several days they will rally back up later in the day. But again, if we just continue to chop in a range and don't breakout to the upside today I'll have to believe it's not going to happen. Tic Toc, Tic Toc...

Yesterdays "Columbus Day" holiday certainly wasn't one for the bears as they pounded the bulls right from the open. But late in the day the bulls fought back and erased the down move put in that day. Then afterhours another "possible" FP shows up with a 286.00 low on it, and it looks like that's where we are headed today from the open. Now since that's a "higher low" then the 285.50 intraday low yesterday there's a chance the bulls are setting the stage for a strong rally up. In this case the move up yesterday would be a wave 1 and the higher low this morning a wave 2 down, which leaves a wave 3 up to follow.

But I have to say that this bounce I was expecting is turning out to be a dud. This truly is looking more and more like a turning point from medium and long term bullish to at least medium term bearish. Short term the market is oversold and due that bounce but if it doesn't show up today going into tomorrow then that's probably the last chance the bulls will get before the bears take back over and drive prices much lower. So the bulls want to rally then holding a higher low this morning to set up the wave 3 up is their best shot.

It will also form a nice "Inverted Head and Shoulders" pattern... which is also bullish. Do or die time for the bulls I'm afraid. There's positive divergence on many charts too... for the short term only (hours to days) though as again, the medium term is bearish (days to weeks). To sum it up the charts say that we are setting up for a nice rally as long as we don't break the low from yesterday.

That's what I see as possible, but I have my doubts too as the bulls are just not stepping up to the plate and "buying the dip" like they used too. We'll see I guess. P.S. Just as I was typing this update there's a new "possible" FP that just popped up showing a move up to 287.82... which might be the close again today? Again, these are just "possible" FP's as they could also be a late fill from a prior day.

The futures are down a little this morning, which is a surprise to me as I kinda thought we'd see some short squeeze happen today from the Brett Kavanaugh win. But that's not the case as the market doesn't seem to care. I still see a bounce coming, as long as the SPY/SPX makes a higher low today compared to Fridays low (if not, then I'll look for Tuesday to put in a higher low).   Overall though I'm expecting a few days of chop to upside before the next leg down in the market. It might not start until this Thursday or Friday?

This early in the move down I'd find it odd and rare to see it continue down without a short squeeze of some degree. But maybe there's not many bears short and/or too many waiting at higher levels to short? Tough call here on the short term but the medium term still points down into the end of this month. I'll just say the short term most charts are oversold due for a nice bounce anytime now.

But there's no positive divergence so a lower low is certainly likely after the bounce. The medium term is still very overbought, again suggesting much more down yet to come. I'll keep this update short and end it here as I'll need to watch the action today to get a better feel for when this bounce is coming, and how high it's going to be.   Patience.

Stuck in a triangle... at least that's where the SPY was yesterday and appears to still be in this morning (or breaking out a little). This big short I'm looking for appears to be getting delayed for a few days. I still see sector rotation going on in the market as the DOW made new all time highs yesterday while the SPX/SPY put in it's high (so far) on Monday. The Russell (IWM) has been taking a beating everyday now for almost a week. The Nasdaq (QQQ) is mixed having both nice moves up and down but also topped on Monday.

I took a small entry short yesterday to get some skin in the game but I'm holding out the rest for a better entry today, tomorrow or Friday. Yeah it sucks but this choppy action could go on until Friday where both bulls and bears get exhausted and give up. Only when they both quit will the market pick its next big direction and take off... which odds still stay is down, and down big.

But I won't rule out a surprise up move if they can trade sideways for another week or so, as I know how important this midterm election is for the president so while I deem the odds low, there's still a chance that they hold off the sell until after it's over with in November. I really don't think they will as this market is super rip for at minimum a 5-6% correction, if not something much deeper and scarier.

So, I'll give this setup until Friday to appear and if it doesn't I'll go back to the sidelines and wait again for a clearer picture to show up. But we need to see this market start trending down here very soon, like the Russell has, so that we can see a clear change in the direction.

Let's just see what today brings us. I may take another small short to average in more today if I feel it's topped. We'll see. Good luck as always... tough spot in the market to trade right now. P.S. Strangely the DOW tagged 26,777 exactly at 4:00pm EST and then settled out minutes later for a 26,773.94 final close. Too funny indeed. Codes, codes, codes... if only I could understand their full meaning.

Yesterday was the first sign of weakness I've seen in awhile. But if you wasn't watching the tape all day and only seen the close you would have missed it as the market did close on both the DOW and the SPX. But the Russell is looking ugly and Nasdaq isn't quite far behind. This is a clear sign of a topping process taking place right now. Today and tomorrow should be the last chance to average into shorts before a much larger drop starts. I'm not sure if we'll put in the high today or tomorrow? But after Wednesday I think we'll start seeing the downside action pick up and getting short in the 2900's on the SPX will be a thing of the past.

I'll be playing it by ear of course to see where the best entry short is at, because is might show up today instead of Wednesday, but considering how many weeks in the past we've seen tops (or bottoms) put in on Wednesday I have to root for that to be the case again. We'll see I guess. For the short term we are showing some early weakness in the futures and the SPY has a gap that "almost" got filled yesterday. So it's possible we drop down early in the morning session today to fill it and then turn back up into the close and/or Wednesday for that final high.

Keep your eyes on the DOW today and tomorrow as "codes" might just appear? I know that yesterday right at 4pm (EST) the DOW tagged 26,666 but after it settled out the final close was 26,651... a "coded message" for those watching closely? It could happen again today, and tomorrow we might just see the power of the number "7" show up... like another all high of 26,777? You never know for sure what the elite have planned.

Don't forget that we've never seen any code show up yet with the number 7 in it, yet Christine Lagarde spoke about it in a creepy speech she did back in 2011 or 2012 if I recall? Then there was the movie called "Triple 7" about a runaway train, which really happened in real life but the actual number of the real train was the "8888", whereas in this movie is was the "777" train.

All I can say is that "if" this market is going to dump really hard... like in a 1987 style crash, there will be "code" out there to signal it just like the bottom in 2009 was 666 on the SPX. So keep your eye open as I'm just one guy that can't watch every market to catch every code. If you see something weird get a screen shot and let me know. I'm in the free chatroom everyday and I share everything I find with all the members in a hope that we can all work together better as a team and all benefit from it financially. Thanks.

The futures are up this morning nicely over 14 points I write this morning update. This should be the final 5th wave up to end a very long rally starting back in January of 2016. If all goes well we will go up again tomorrow and possibly Wednesday to top it all out. I'm still expecting this to end on Tuesday or Wednesday and then to start a very large drop drop into most of October. It should scare the crap out of every trade and look like the January drop... but worst. It could even take out the lows put in from that drop as well, or best case it just double bottoms there.

But we need 1-2 more days of a grind higher for this to setup. If we rolled over today and started a move down it could lessen the drop. So if you are a bear here you want today and at least tomorrow to close green and preferably Wednesday too (but not 100% required... a flattish close slightly in the red might be "ok" as well). I'll keep this update short and end it here as that's what I'm looking for to happen. Failure here might avoid the big drop and push things out or into a chop mode... too early to tell. Just root for the bulls today and tomorrow so they can run right into that large meat grinder just a day or two ahead of them.

This morning I want to look that the SPY 2 hour chart, which suggests a rally is coming soon. The MACD's are around the zero area and merging close together as well. The futures this morning are down some as they retested yesterdays low and bounced back up some from it. From looking at both I think we'll open this morning and find an early bottom and start a rally back up afterwards and close green. I suspect this rally will continue into early next week where I expect the market to top out by Tuesday or Wednesday.

When this top happens I'm expecting a nasty drop that should be labeled just a correction but I won't rule out a crash. I'm saying that only because of the political drama going on around Trump (and few other similarities it has with 1987), as the Democrats would love to see the Republicans lose control during the midterm elections and a crash to blame it on Trump would be a great start for them. I give the crash low odds but the correction I give high odds. Anyway, I'll keep today short as I've already said I'm expecting a bounce today with a green close. Have a great weekend.

The FOMC meeting yesterday did produce some wild swings, but in the end sold off into the close... very unusual. Today we see the ES Futures still down from yesterdays drop, only bouncing a couple of points back up. Normally I'd call that sideways action a bear flag and expect more downside this morning... which is possible but odds don't suggest much more selling. That drop after the meeting put in some heavy volume candle selling on this 60 minute chart and pushed the MACD's down below the zero line by around 20% or so (this chart goes from 0% to 100% and 50% is the zero line on other charts).

The thing I notice is that when the MACD's were this deep in many of the previous times a turn back up followed shortly there after. Couple that will large volume and odds favor another move up before a larger drop starts. The thing I'll be focused on is "time", not so much the amount of the move up. Previous times the amount moved up was quite strong but if we are truly at a turning point here we might experience a delayed reaction and a shallower move up.

For this to behave like similar moves in the past it needs to move up sharply today as it if just chops sideways instead that MACD will rally up from oversold to overbought by the close and then the market is vulnerable to another drop. That should just be a continuation of the smaller C wave down... which should finish it I think. It's going to be more of a "feel" thing today as I watch the charts to look for clues about the next big move setup (that has high enough odds for me to play it). If we go sideways most of today and drop into the close for a lower low in price but higher low on the MACD's then odds say that's all for the smaller C wave down and larger A wave from the 2947 high last week.

That should setup a rally on Friday. But if the MACD's go lower then there'll be NO positive divergence and odds will be 50/50 on the direction for Friday. Anyway you look at it we are most likely at a turning point where we'll see some choppy waves down, then choppy waves up (for a lower high), then more of the same... and finally (maybe late next week?) we'll see a large drop day that takes us to the 2790-2800 level if my thinking is correct.

If you are a bear you want a strong rally today to make a lower high where you can short at. If you are a bull you want to see the positive divergence setup with a final drop on the price into the close today after mostly sideways action. That would likely setup the larger B up on Friday (which might subdivide into smaller waves?) and leave next week open for that larger drop. If I get a high odds setup by the close and take a position I'll post it in the chatroom. Otherwise I'll wait in cash for something better to appear.