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Wednesday, June 23, 2010

What to make of this?

There are a lot of ways that the move since early June can be counted. There are pros and cons to all of the options, that is to say there is nothing cleanly impulsive or corrective about the waves. It is sufficiently ambiguous to defy a clear interpretation. Anybody who says otherwise is blowing smoke (or else smoking something). This really is a mess.

So in this post, I will step back a try to attack this technically first and then move into some of the wave counts and try to determine where we are. I will most certainly be wrong, but I think the exercise will prove useful and hopefully this will start a good discussion.

Daily Chart:

There are still a lot of bearish developments on the daily chart which is why I tend to lean bearish

1) Death Cross (50 day MA moved under 200 day MA) on the NYSE Composite
2) 50 day MA serving as resistance for SPX, NYA, INDU, RUT, COMPQ, and NDX. This is *very bearish*
3) Trendline is reinforcing resistance at 50 day MA on SPX
4) Up volume during the last 2 rallies has been *pathetic*
5) Daily RSI, Stochastics and MACD have all turned down again

What this does is it helps put some of the possible counts into perspective:

The leading diagonal count: If this is just the B wave in a Wave 2 correction, we have a lot of daily downward momentum to overcome in a C wave back up which would travel about 100 points. Possible? Absolutely! But is it likely? My gut (which has been terribly wrong on numerous occasions) says no

So where does this leave me?

It leaves me with the count that I have been showing the last several days. But it further means that the count the last 3 days needs to be interpreted as an impulse down. I was not leaning this way. It seems to be corrective, that big triangle right in the middle of this wave does not work as a 4, (and counting a triangle as a 2 makes me want to puke all over your head, sir -- for any Arrested Development fans).

So I am going to take a little bit of 'creative license' in counting this wave as an impulse, and lets see how ugly it gets:

.... pretty ugly. It does work, but I don't like it. But then again, nothing about the waves the last few months have been clear to count. So, ugly as it may be, this is what I am going with.

Here is how I think the next Minute waves will play out

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