Yesterday I was thinking that the move up off Monday's low is some kind of smaller wave 4, and in the chatroom I discussed it looking as though it was sub-dividing into an ABC pattern... which I think completed into the close yesterday. Now we should be in the 5th wave down and it should be the last wave before a strong rally up take's control and runs us into this summer with a new all time high expected. This 5th wave down could be just one wave or it might subdivide into 5 tiny waves, there's no way to know for sure. If it's one wave then it might truncate short of breaking Monday's low, but if it breaks into 5 tiny waves then it should take out that low and look to retest the February 5th low of 2532. We certainly need a flush out here as the bulls keep buying the dips with no fear, and before we can start a strong rally up we need them to capitulate. So maybe we breakdown today and take out all the stops that the bulls have just under 2532 and then reverse hard back up? It's a tough call here but I'm excited about getting this correction over with and a rally up to 3000+ started as it's much easier to be long then short. Yeah, I'm still a bear at heart but it's hard too short successfully as the market is so biased to the upside. Anyway, that's all I have for today... good luck.

Yesterday's drop did catch me by surprise a little as while I was expecting it to happen I thought it would do so over 3 days versus 1 day. But that's the new trading enviroment we are in now, which has huge swings up and down that would have been called a mini-crash a year ago. It appears to have been a wave 3 down of a smaller degree and we are likely in the wave 4 up right now. This suggests one more 5th wave down to end this sell off and start the rally up into the summer.

There's horizontal resistance in the 2600-2620 area on this move up and there's the upper falling trendline in the purple channel pointing to around 2620 as well. So that's my target area's for this wave 4 up to end. Maybe it does it today or tomorrow... don't know? But I do expect one more move down to scare the last bull out. It should break the 200 day moving average again (it pierced it yesterday), which everyone will see and think the bull market is over with. Shorts will pill on and bulls will exit with a loss. Only then can we get the rally going hard to the upside as we need to see capitulation everywhere.

That's when it will all turn around when everyone throws in the towel and gives up. Now, do it have too break yesterday's low? No, I don't think that's required but FEAR is! So it could just chug along all day today into resistance and close near the high of the day. Then tomorrow it might gap down and come within a few points of that bottom from yesterday to put in the 5th wave and end this correction. It would be a truncated 5th wave of course but I've noticed many times them showing up lately, instead of the normal 5th wave that makes a lower low (or higher high on a move up).

It might be because everyone is expecting it to break and has buy orders in, and of course SkyNet doesn't want traders to catch the low and will make them chase it up. Regardless of if it's a lower low or higher low I do still think we will make that 5th wave down today/tomorrow before any strong rally up starts. If it breaks then I'd look for the 2/5 to be broken too... probably not a lot but enough to take out all the stops the bulls have placed around there. So a pierce of it would probably do it, and it should reverse back up fast from that level. I'm 50/50 on a lower low for this 5th wave down coming, or a higher low. We'll just have to play it by ear as the old saying goes.

I hope every had a good holiday weekend. Always remember that Easter has nothing to do with bunny's and egg's... it's about Christ rising from the dead. Anyway, we're going to look at the 6 hour chart this morning for clues. On it you see a MACD that come up from -30 or so to just a little over -10 right now. But you also see the futures price still trapped in the falling purple channel. The pattern forming right now is a "cup and handle" but I must point out that if they can't pierce through the upper falling trendline in that channel to get out of it by the close today then I'd expect the pattern to fail the MACD's to rollover tomorrow.

It looks like it needs to be around 2640 or higher by the close to be outside the channel where the cup and handle pattern can work. Failure here and I'd expect the next drop to take out the recent lows of 2586 and could even take out the 2/5 low of 2532 (not positive on that low but triple bottoms don't usually hold). I exited out of my longs Friday with a profit from the late day run up. I'll be looking to get long this week again on a drop below 2/5 low as I think the next rally up will be the one that takes us up to new highs into the summer months. Of course there will be pullbacks but I don't see the coming low being revisited in a long while This whole pattern from the 1/26 high to the 2/5 low (the A wave), then the 3/13 high (the B wave) and the expecting lower low coming (the C wave) is just a large ABC down to make up some larger 4th wave down with a 5th up into this summer yet to come.

I still see it possible to hit 3000 or more on the SPX and 293.90 SPY (about 2340 SPX) as clear target foretold by a FP sometime back. But for now I'm looking for one more move down, which should likely happen into a mid-week low. It could be pushed out if we close over that falling upper trendline today around 2640+, and "maybe" canceled all together? I doubt it though as even if we get out of the channel we still have strong resistance at the falling red trendline pointing to around 2680, and I really doubt if we can get through it with MACD's overbought as they will be in another day or two if they continue rising.

I'd guess we'll be around the zero level where "turns" are common (I mentioned that several times in the past but there aren't just common from coming down from overbought to zero but also from common up from oversold). Therefore it's more likely that we don't get out of the falling channel and make a run for the falling red trendline but instead just rollover tomorrow on the price and the MACD's (which should make a lower low in the price and higher low in the MACD's) and start this nice decline tomorrow instead of trying for the 2680 area over the next few days and then rolling over late in the week to take out 2586 and possibly 2532.

Besides the charts telling me that's it's more like to start down today and bottom into mid-week and then rally until the end of the week (versus rallying up into mid-week, then rolling over and bottoming into the end of the week), there's also the all important 200 day moving average around 2590 on the SPX that the bulls won't want to close below on a "weekly closing price". It's critical for the bulls to NOT close out the week below that line!

So going down early in the week and piercing it mid-week gives them time enough to turn back up and recapture it before the week ends. In conclusion I'm bearish today into Tuesday/Wednesday if we fail to close over 2640 today. I'm neutral if we do close over it and would re-examine again. I'd likely look to short a hit of the falling red trendline around 2680 if they rallied up into today or sometime tomorrow. If that happens then I don't think we'll make another lower low on the move down that should follow.

I love it when a plan works out! Yesterday I guessed that we'd have a move down to make the right shoulder of an inverter head and shoulders pattern where I'd look to get long... and low and behold it actually happened. That move down was likely a wave 2 of some degree with the rally back up all day as the wave 3, which leaves us today to either end the wave 3 up or just go ahead and start the wave 4 down... which I don't know? We are hitting resistance this premarket morning at the upper trendline of the falling purple channel, so we might start the wave 4 down today if the bulls can't push through it (which is usually best to do during the premarket while there's less volume).

Ok, if they pullback I wouldn't expect much... maybe 2660 or so would be my best guess. I think any pullback is just a gift as I think we are going much higher in the coming weeks. In my opinion this move is where the bears get tricked as they try to short it on the way up expecting another lower high to make a right shoulder on a larger head and shoulders pattern. I've been down this road too many times in the past 10 years, shorting the shoulder only to get squeezed hard by the bulls as the shoulder just keeps on going up and up and up. Anyway, for today it's looking like we will pullback a little early on by staying under that purple trendline of resistance.

But I wouldn't be surprised if we don't turn back up later in the day to push up through it. If not then I'd expect it to happen afterhours today and premarket tomorrow. The target is the red falling trendline pointing to around 2700 right now. I would expect some good resistance there so possibly that ends the 5th wave up and allows for an ABC pullback for a few days before another 5 wave pattern up starts and pushes up through with goals of 2800 in mind. A wise thing to do (at least I think so) would be to exit longs on that 5th wave into the falling red trendline.

Then wait for the choppy ABC pullback (I think it will be small which is why I won't play it) to end and try to catch the next long up. I think a lot of people are expecting some huge drop after this move up into that 2700 area completes, but I just know from experience that head and shoulders patterns rarely seem to work on the SPX/SPY. I don't know why, other then the fact that everyone see's it and plays it so SkyNet won't allow everyone to win. Possibly the pattern works better on stocks, don't know? Ok, that that sums up my thoughts for today and the next few days. A pullback for a small wave 4 down could happen today or afterhours, then a wave 5 up should follow.

Last week was brutal for the bulls but this week looks to be the opposite. This morning we are opening up strongly right out of the gate with the futures up over 30 points this premarket morning. Once open though I'd suspect we'll see some trapped bulls hit the sell button to exit but I don't see the market going down again to a lower low. What's more likely is that we drop some to make a right shoulder of an "inverted head and shoulders" pattern, and then launch back up strongly all week. This first move up is likely just a small wave one and the panicked selling at the open by trapped bulls (if it happens?) would be a small wave 2 down in my view, and an opportunity to get long for what is likely to be a very strong and long lasting rally.

I do not expect this to die out in a day or so but to last all week and to produce a large point gain. I would not be surprised if we make new all time highs again before the rally ends. Maybe it takes a month or two, don't know? But this rally is likely to stay for awhile and should not be shorted but should be bought up on pullbacks. I'll be looking for that pullback today to get long myself but if there's no pullback I'll still look to average into a long position. Ideally we drop back to around 2600 to make that right shoulder but again... no guarantee. Good luck to everyone. Oh... one last thing, if for some reason we drop into the red today and close slightly lower I'd be super, super, super bullish about tomorrow and would look at it like a gift and would go balls to the walls long.

Yesterday's big drop took most by surprise I think as even I wasn't expecting the lower trendline in the falling purple channel to break. Never the less it did break and we headed on down to the next falling trendline in black before stopping. All in all it was a very ugly day for the bulls. This morning we see the futures bouncing back some but it doesn't yet feel like we are out of danger yet.

The drop yesterday looked like some degree of a wave 3 down, so this move up should just be a wave 4 and then we should see a final wave 5 down before this ends and a powerful rally starts. How high this wave 4 goes is unknown, but if it ends today and we drop again by the close for that 5th wave then I'd be looking at a long over the weekend. However, if it continues up today and closes while still in that wave 4 (or maybe starting the wave 5) then I suspect we'll be waiting until Monday for the pattern to end.

Meaning it could rollover small to start the wave 5 but it not clear that it is a wave 5 or it's just too short to have ended then I'll again be waiting until Monday. And if the market continues up into Monday then I'll wait until Tuesday, and I might even short that wave 5 down if the 4 up goes high enough. But I'm not expecting that to happen. Yeah, I'm leaning toward today closing green as this wave 4 up tries to do it's thing but I'm not expecting it to be super strong and continue into Monday.

My best guess is that we'll see the 4 up throughout today and afterhours and the 5 down will happen premarket and into the open on Monday. Basically I'm not convinced now that the low is in as I think we'll test 2600 or 2580 before it ends. The "when" part is not known to the exact day but I do think we'll see it next week.

Also let's not forget that it's a shorten week due to the market being closed on "Good Friday" as it's a holiday. And the first of the new month is right around the corner so there's high odds we'll end this move down early next week and start a strong rally up into early April. Also, the inverted head and shoulders pattern is dead now as this move down was supposed too be the right shoulder, making a higher low then the head on 3/2... which is why I was thinking the falling lower trendline in the purple channel was going to hold and make that pattern work. Anyway, that's my thoughts for now. Have a great weekend.

Ok gang, today is FOMC day so I don't expect much action until it gets closer to 2pm EST. Of course no one knows which direction it's going to go but my plan is to wait and see. I hope is that it will tank afterwards into the close and if deep enough I'll look to get a long position as I think this is going to be a big bear trap and fool the masses with a very strong rally afterwards. Now, there is a possibility that it might go down into Thursday as well and then start the reversal back up on Friday, so I'll be watching for that too. Of course if it rips higher after the meeting I'll likely sit on my hand and wait for it to stabilize as it could be the "fake out" up move and then back down hard to shake out both bulls and bears.

Just note that I'm short term bearish, as in today and possibly tomorrow and then medium term bullish... as in, I think a strong multi-day (maybe weeks?) move up is very close to starting. My goal is to catch the bottom right before it rips higher without letting anyone get long after starting. It's hard to do as we all know how fast the up moves go after they get started. There's hardly any pullbacks. Anyway, for today the support on a down move is the lower trendline in the falling channel in light purple. Currently it's pointing to around 2670 or so. That's a pretty big drop so I'm not sure if we'll see it but never the less that's the support area. On the upside resistance is just a few points higher currently from the falling uptrend line of that same channel. That's the range so now we just wait and watch until the meeting starts. Good luck to us all.

Today we are going to look at the 6 hour chart for clues. I'm also using the June ES Futures contract instead of the March contract. You'll notice right of the bat that there's a rising black trendline just a few points lower that will be support should we drift down more today, and that's completely possible as all this sideways action has made a nice bear flag, which is very obvious on the 60 minute chart. But, we are making higher lows and that's still bullish for now. So even if that rising trendline fails to support the market today and we go lower there's still another falling trendline pointing to around 2730 that will be good support as well.

This entire rally up off the 2/9 low has formed a both a regular triangle (that got busted on 3/9 when the bulls pushed through the top trendline of it) and an "ascending triangle" (that's upper trendline is marked in green), which I see as bullish still (short term). But I am concerned about the daily and weekly charts on the SPX and DOW (who is still trapped in a regular triangle and failed to bust out) as they look quite bearish to me... especially the weekly. The monthly is also "still" very overbought and while there's not been any bearish cross on the MACD's the top black line of them has rolled over.

It suggests to me that the rest of this year we could see some continued choppy action as various charts between them try to align up with the monthly for either a strong move up or down. If the weekly can work off it's bearishness (it's MACD's are very bearishly aligned, pointing straight down right now) then possibly it and the monthly can push back up together and get us another higher high later this year. But that's a big "if" as right now the big picture just doesn't support anything but more large range trading or a correction down.

It's still too early in the year to forecast so I won't say the top is in as I just don't know? I'd just say that the weekly and daily chart do not support any bullish breakout to new all time highs currently. If the bulls want to go higher they should close in the red today and possibly Monday too so short term charts will be oversold enough to get a nice bear squeeze going... as if they close green today and Monday and even Tuesday I think they will be too overbought again going into the Wednesday FOMC and another nice drop should follow.

But we old timer's have been down this road many times as whatever direction they do in the few days prior to an FOMC meeting is usually reversed right after it. So, if we go down into it then expect a rally back up afterwards. If we rally into, then expect a drop after... you get the picture. Anyway, for today I again don't see any clear picture. It could go either way. I won't even speculate as I just don't see anything but mixed short term charts. Have a great weekend.

Yesterday I proposed that we could see a C wave down inside an ABC pattern to finish the smaller wave 4 down, and that's pretty much what happened. And for the most part the yellow rising trendline was where it stopped (slight pierce) at and reversed back up as you see right now. If this is the smaller 5th wave up then I still think it could reach the 2820-2840 area before ending. Since I covered most all of this in yesterdays' post I'll keep today short and simply say the market is behaving as expected so far and to look for it to crawl up some more today, but it's looking pretty exhausted up here so I'm not expecting a fast and hard squeeze. A grind today seems more likely, and possibly tomorrow we get the squeeze? I will add this though... a slow grind is preferred if you are bearish and looking for the next big drop. A strong and fast move up should delay that drop as then it could reach pretty close to a double top and hang around there chopping for many days to frustrate everyone.

We hit a hit this premarket morning of 2800.00 and yesterday's high was 2800.50, which makes this move up (so far) just a small B wave with a small C wave down still possible. Of course this wave count is no longer valid if we rally back up and take out 2800.50 cleanly (meaning more then just a few point pierce), but right now the futures hit that lower high and fell back nicely dropping around 4 points from it as I write this morning update post.

By no means do I think this rally is done but pulling back with a small C wave down is possible and would probably be labeled a medium wave 4 down with the entire move up from the 3/2 low of 2647 making up the medium wave 1 up, medium wave 2 down, and medium wave 3 up to top out at the 2800.50 high yesterday. So if this does turn down today I'd expect the rising yellow trendline to become support for the smaller wave C down, which is pointing to around 2770 right now.

Then that entire ABC down might be all for medium wave 4 down. And it looks to me that all of these medium waves make up a larger wave 5 up, which could go up into the 2820-2840 area before the week ends. Now again, I'm not an Elliottwave expert but I do have the ability to count waves and that's what it looks like to me. Once this medium wave 4 ends then medium wave 5 up should take us up to that 2820-2840 zone, and when it ends it should also end larger wave 5 up. Ok, from there we should expect a nice drop to follow but odds still say the high for the year isn't in yet and much higher levels are expected.

Most EW experts look at the current high on 1/29 as ending a wave 3 up of some degree (which lasted many, many months regardless of where you have it starting), and the drop into the 2/5 low as a wave 4 down, which may have ended already and we are in the 5th wave up to new all times highs. Or it might breakdown into a ABC wave pattern down instead of just one large wave down. I don't know which is right or wrong. but lets not worry about that right now as either way we should still have a nice drop after the smaller wave 5 up ends, which ends the medium wave 5 up too.

From there we should have a 100+ point drop start. The first support will be the rising blue trendline pointing to around 2710 right now. After that we have the double bottom level at 2647 from 3/2 as support. My guess would be either the rising blue trendline or somewhere in between as a low. I don't think it will fall to that double bottom level. But remember that we first need to rally some more to around 2820-2840 or so first to complete the waves up.

Then dropping from there might rise the blue trendline up to 2730 or more by the time it's hit next week. Anyway, that's the smaller to medium time frame I see right now... down today/tomorrow to hit the rising yellow trendline and up the rest of the week to top out the 5th waves in the 2420-2480 area... and that could be higher (like a hit of the light green rising trendline pointing to around 2857 or so right now) if the pullback today/tomorrow is small or just doesn't happen at all.

The rally continues this Monday morning with the futures piercing the 2800 level before the open and pulling back a little right now. The March contract ends this week and we'll be moving on to the June contract, which is running about $5 higher. So far it's looking good for the bulls to take this up this week to possibly as high as the rising green trendline pointing to 2850? No guarantee of course as the 2820-2840 area should have some tough resistance from the 2 or 3 days it chopped there back in late January before the mini-crash. For today it looks a little extended too me so if we pulled back a little I'd expect it to be just to reset and go higher again later today or tomorrow.

I do think it's running on its' last leg (so to speak), meaning the bulls will likely tire out this week and we'll see another drop next week... which is also FOMC week. The big picture is still bullish going into summer and/or later this year. But the medium picture (less then one month) suggests that we are just in a large multi-week rising bear flag and at some point we should expect another big drop. Call it a larger B wave up if you want with the mini-crash down to 2530 the larger A down. There should still be a large C wave down coming but there's no way to predict the "when" part. It could take 5 months like the other 6 times (3 pairs of 2) the MACD went below -300 on the daily chart (discussed in a prior post last week).

Anyway, I don't have any clear direction today. Looks like it will pullback small and try to go back up later. I feel we are going to dance around in this area between the rising yellow trendline pointing to around 2750, which is also where the falling orange and black trendline fall to, and the two rising green trendlines both pointing to 2850 or so. It's a wide range for sure but I suspect we'll stay in it all week as they need to shake out the bears before any good move down can happen. There also a possibly FP on the VIX pointing to 13.31, so I would expect it to be hit at some point this week, and it could match up with the high in the futures as well? For today though I just don't see anything clear. Again, I suspect it will drop back some in the morning but go back up again later today and into tomorrow.

Another day of nothing. So far this morning the bulls nor the bears have any interest in this market. We are still stuck in the larger triangle pointing to around 2755 now with the black falling trendline and the red falling trendline on the upside and 2695 or so from the blue rising trendline. But the yellow rising trendline seems to be support for now, and I suspect we'll ride it all day today and push out any big move up or down until early next week. I'm sure everyone now see's the obvious head and shoulders pattern but I'm still not in favor of just shorting blindly assuming it's going to work. It's got a very bad track record over the last 10 years or so as SkyNet has taken over the market, which is now around 84% computer algo trading.

The internet has leveled the playing field for the retail trader versus the professionals and that means that both parties can now see the same patterns, which in turn means that you'll have them both on the same side of the trade... and that forces the market to go the opposite direction as it's not designed to let the masses win. Of course I don't have access to see where everyone is positioned so I don't know if there's more people bearish or bullish at this juncture in the market. Maybe the opposite is true and everyone see's this move up as a 5th wave that should go to new highs? Personally I can't imagine that many traders missing the obvious H&S pattern but anything is possible I guess.

Like I said I think the pattern works about half the time and fails the other half, so we should just ignore it and focus on other clues to forecast the next move. Unfortunately there doesn't seem to be anything clear in the technical analysis side as charts are mixed on different time frames of both the SPX and the ES Futures. Longer term, like week's and month's, we are still very overbought. But shorter term we are mostly neutral with the opportunity to go up strongly or down strongly. Anyway, I'll end it here and wish you all a great weekend. We'll see what Monday gives us as I think today will be just like yesterday... another Ground Hog Day.