SP 1115 as the target?

I am inclined to think we will see at least 1110-1115. There is an obvious rising wedge that needs one more leg to it to make it look right. And once we're at that level there will be a drop, especially if we get there in an impulsive manner. The key clues to what the long term count or direction of the market is will depend on that drop. If we get something truly impulsive to the downside then I would say a larger downside wave is in place. But if there isn't much intensity in that sell off, I would bet we're going sideways or higher. So the battle starts at the 1115 level and things will become truly clear immediately after that. I think for us to get an impulsive wave down we will need a catalyst that will impact the market, otherwise we'll just get a regular wave down which is something the bulls can deal with.

I am holding on to my long position until the next rally (on Tuesday/Wed?) and then I am going massively short. And for the record, I am currently bearish but not "P3" bearish.

On the bullish side, there is an inverted Head and Shoulders formation that is looking good at the moment with a target at 1142. Also, there is the expanding triangle scenario I posted earlier. And I would say if the drop from 1115 does not confirm the most bearish count (which would take out the 1040 low), we'll probably see this particular expanding triangle count take place.

Levels to watch are

1108 ema 34
1135 ema 13 - If the wave down from 1115 is not impulsive, this would be a good spot to short.
1105 ma 200
1163 ma 50

Inverse Head and Shoulders Pattern

I am putting my money on the line betting this is an ABC correction. If A was 50 points, we just need to add 50 points to whatever low B has. So if B turns out to be 1055-1065 then end result will be 1105-1115 (coincides with the 200 MA and 34 EMA) which at that time I will be shorting again (I was short the entire day and went long at the close). I think it's important to keep TA in mind, we need at least 4-7 up days and see where the market is at to see if the downtrend is confirmed indeed. I think staying short without any guidelines for profit taking is a recipe for disaster, if unsure stay in cash.

1104 200 MA
1106 34 EMA
1131 13 EMA
1166 50 MA

Trend is still up and the market is oversold. Odds favor a bounce.

Possible Expanding Triangle

A lot of EWT followers are now calling for continued downside but as a trader one has to consider all possibilities. As a cautionary note there could be an expanding triangle in play with the first peak in January, second peak in April and the possible third one. The fact today's low was just a tad lower than the first valley and the extremely oversold conditions gives support to this scenario. As a matter of fact, if that turns out the case it would be a text book expanding triangle which btw is typically found in the 5th wave. I am bearish until proven otherwise but the fact today's low was exactly at a trendline from March 09 is suspicious.

Targets for retracement

These are the possible targets (they constantly change since they are averages) I have for the coming retracement wave. Given the fact that we are very oversold, these targets are within reach. Especially the 200 MA and the 34 EMA. I personally will give it 7 white candle days and see where we will be at, we had 7 red candle days.

1103 - 200 MA
1106 - 34 EMA
1132 - 13 EMA
1168 - 50 MA - This would be a sweet spot to short if we can make it there in a violent rally.

Trend is starting to roll over.

Interesting Week

So we made a newer low today relative to the "flash crash" couple of weeks ago and that's another bullet for the bearish case. We got a solid close below the 200 MA today and today's action was on the panicky side early in the morning and in the last 10 minutes of trading. A lot of people are betting on a bounce given the oversold levels but most Elliott Wave practitioners are calling for a fifth wave down. So there might still a chance of seeing 1044 this coming week as in Monday. We ended the day in a 3 wave of something and probably this particular wave will take us to the 200 MA where it will act as resistance. I personally will be adding short positions there and stopping them at any moments notice if the 200 MA is recaptured.

There are a few levels to watch, perfect for short entries or long depending on which side you find yourself in.

1102-1108 as a stop for shorts or as a base for a break out. I would trade short only if under 1102, trade long only if over 1108.

1122 as a stop for shorts or profit taking

And the levels below..

Levels to watch are:

1108 Short below it or use it as a stop for portion A -34 EMA Weekly
1142 Long above it for portion A -13 EMA Weekly
Trend is still up on the weekly 13/34

1170 Long above it on portion B -50 day MA
1102 Short below it or use as secondary stop for long position -200 MA
Trend is still up on the MA

Trend is finally down!

Today's sell off finally changes trend and it will be a matter of time before the averages make the crosses. The important thing is to stay alert at the key levels mentioned. Currently, I see the impulse wave from today ending at 1171 as an expanding triangle, which is typical of a reversal. However, in order for bears to finally get control, the 1065 level would have to be breached. I expect the market to attempt a rally either tomorrow at the opening or after one more impulse. The obvious target will be the 200 MA and closing today's gap. Also, there is so much fear and volatility now that this points to some sort of turning point. The trend itself is up but since the indexes are trading below the averages, the safest bet would be to stay clear in the meantime or play the bounce for the brave. There will be a subsequent ABC at this level or at the 1040-1050 level.

Levels to watch are:

1108 Short below it or use it as a stop for portion A -34 EMA Weekly
1140 Long above it for portion A -13 EMA Weekly
Trend is still up on the weekly 13/34

1172 Long above it on portion B -50 day MA
1102 Short below it or use as secondary stop for long position -200 MA
Trend is still up on the MA

Moment of truth (again)

Today we saw the gap at 1107 close and my short and long set up worked beautifully as the 200 MA served as a target for short and perfect entry for long (the low was 1101). So tomorrow we'll see which camp of EW theories is right. Elliott Wave Intl calls for a 3 of 3, an accelerated sell after a 2 retrace. Others call for a zig zag to the 50 day MA and me I tend to favor a C leg to close the gap at 1160. Which one will it be is anyone's guess and with a mixed trend here, I am staying cash and day trading only which has worked out great given the volatility.

So tomorrow these are the levels.. will the market attempt a rally to re-capture the 13 EMA? or will it serve as resistance? I will be shorting until the 13 EMA tells me not to.

1110 Short below it or use it as a stop for portion A -34 EMA Weekly
1146 Long above it for portion A -13 EMA Weekly
Trend is still up on the weekly 13/34

1173 Long above it on portion B -50 day MA
1102 Short below it or use as secondary stop for long position -200 MA
Trend is still up on the MA

A correction or a change of trend?

These are the key levels to look out for (I posted them yesterday but they still apply):

1110 Short below it or use it as a stop for portion A -34 EMA Weekly
1147 Long above it for portion A -13 EMA Weekly
Trend is still up on the weekly 13/34

1174 Long above it on portion B -50 day MA
1101 Short below it or use as secondary stop for long position -200 MA
Trend is still up on the MA

On the Elliot Wave count, I favor a new low as the B of a flat or an expanded zig zag. Therefore, I expect the market to find support to test the 13 EMA and then 50 day MA again.

Abandoning Bearish Count

At this point in time I am inclined to follow a new count that us bullish and I am no longer holding a long term bearish bias. In the near future I am expecting the S&P 500 to advance a final leg to around 1180-1200 before going into a correction. I no longer believe in Elliot Wave International's count and I think people following the bearish count should be very careful here. As a trader one needs to know when to take loses and and adjust. This is not about intellectual pride or about what is "right". This is about making money trading stocks.

I will be posting a chart once the bull count is confirmed.