Sunday, October 05, 2008

IT/LT update - 10/5/2009

I was completely wrong in assuming that a major wave A had ended and wave B had begun. That cancels all my upside projections for now. 9/18 bottom was as good as it gets. Horrible sentiment. A violent price move out of that. A kickoff move on the NYSE Vol osc. And the price finding support a LT wave 4 support and a technical measured move. But none of this was sufficient for this vicious bear. I was expecting a 50% retrace of the 9/18-9/19 move and a rally after that. I was cleary proved wrong.

It's very concerning that the market failed to hold at the previous wave 4. It's very concerning that the market did not hold the double top measured move projection to 1170. It's also very concerning that weekly candle hammer was reversed with even more violence.

Now given that the double top projection to 1170 did not hold, the next measured move projection comes from the (2/1, 5/19) double top, although not a perfect double top. Depending on whether you use 2/1 or 5/19 for the projection, we get two targets - 1040 and 1070. If 1040 does not hold, then there are no further technical projections at this point in my work. That to me would mean a larger degree trend change may be in works. Too early for me to jump the gun on that and make bold sorry projections. Just to give a clue on how overextended the market is here, look at the weekly bollinger bands. Price close way below the weekly BBs and failed to mount a reversal out of it. In the last 10 years we have seen two instances where this kind of configuration presented itself - the week after 9/11 and July 2002.




Bottomline, i will be watching SPX 1040 with interest for clues on possible larger degree trend change. For now my wave count remains the same, except that the intermediate wave that i thought bottomed on 9/19, continues to extend.

P.S - BTW, i closed my SPY positions that i opened last week for 60 points gain, which i posted on traders-talk, since i think we are at the crossroads of a possible trend change of higher degree.

Good luck !

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