wednesday update

SHORT TERM: SPX 912 pivot fails to hold support, DOW -514

Overnight the Asian markets were all substantially lower, Europe opened lower and closed down 4.45%. US index futures remained under selling pressure throughout the night, and the market gapped down at the open. By 10:00 the SPX traded down to 913, at the 912 support pivot. It closed at SPX 955 yesterday. A rally to 931 by 12:30, near the next pivot at 935, failed to generate any additional buying and the market headed down again. Then after making a slightly lower low on the day at 908, the market vacillated around the 912 pivot for more than an hour. After that it broke lower. By 3:30 the SPX hit 876 and then rallied into the close. For the day the SPX/DOW were down 5.90%, and the NDX/NAZ were down 4.20%. Bonds gained about 21 ticks, Crude lost $5.35, Gold dropped $43.00 and the Euro was lower. Support for the SPX slips down to 848 and then 789, with resistance at 912 and then 935. Short term momentum is oversold. Tomorrow the weekly unemployment report at 8:30. Time for a recap.

We’ve been labeling this bear market as a series of threes. An ABC Major wave A into the January low. Then an ABC Major wave B into the May high. From this May high the market has moved down in an ABC: July low, August high, and the current downtrend. Each of the downtrends: Nov low, Jan low, July low and the current one have been five waves structures. In basic EW terms this is considered a double zigzag: Nov-Dec-Jan–May–July-Aug-current. The current downtrend should also be a five wave structure, to conclude the final wave of a 5-3-5-x-5-3-5 from the October 2007 highs. The most probable 5 wave count for this downtrend is as posted on the SPX hourly charts: wave 1 (1134), wave 2 (1265), wave 3 (840), wave 4 (1044) and we are currently in wave 5. This fifth wave could have ended at SPX 866 in a 5th wave failure. There is a fibonacci relationship at this level to wave 1. But the rally off that low ran into significant resistance over past fews days at the SPX 990 pivot, and the market nearly retraced that whole advance in the last 24 hours. Since this fifth wave still appears to be ongoing SPX 866 may be Minute 1, 985 Minute 2, and Minute 3 underway now. This scenario would align with the historical analysis posted over the weekend. This analysis referred to the five historical multi-day/multi-week crashes since 1929. In four of those five events, either a lower intraday low was made after the crash, or a lower weekly close. Since the intraday low is at SPX 840, and the lowest weekly close is at 899.20, one or both of these levels in likely to be exceeded before a significant uptrend can get underway. For now, the short term 1-2-3 down from the recent high at SPX 1044 appears mostly likely. The important support pivots to observe are at SPX 912, 848, 789, and 768 the 2002 low. Should the market trade down to the 848 pivot, and bounce off that level for a number off days, it could form a diagonal triangle 5th wave. Should the market break that support pivot and trade to the lower 789 pivot, it could complete the 5th wave there. Near this pivot there are numerous short term, medium term and long term fibonacci relationships. Review the SPX hourly and daily charts. At some point in the not too distant future, the market should experience a 38.2% to 50% retracement of the entire bear market thus far. Should it launch from the 789 pivot, the likely target is the pivot at SPX 1179. In each the five historical crashes, after the market finally settled at a low, it either made new highs or retraced 50% of the entire decline. Something to look forward to in the not too distant future.

MEDIUM TERM: downtrend low at SPX 840 being challenged

LONG TERM: bear market, Primary wave A still under way

CHARTS: http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1606987