In my September 10th update I said:
Even though it all played out to plan, I’m not convinced we topped just yet. At the same time, I don’t think we tested the 1290.50 support enough to continue higher.
Next week we will expect to do some more testing of our support area, knowing it might fail only to reach the proposed market structure target. If the S&P’s are about to launch another high, I would want them to start from lower levels.
The bottom line is that before my next target date of Sept. 22, we might have a power struggle among bulls and bears that will lead to a very powerful move.
So, we gapped down Monday morning and traded 8 points lower in the first hour and a half, only to trap everyone in a 30+point squeeze! Monday’s low stopped less than a half a point above the outlined support target that I have discussed in these updates. Once again, as many thought the high was in, we went long that low since we believed we had the correct target. There was no risk to the trade, as it clearly showed its impulse from the start.
Many believe that if they can count five up and three down, they have mastered Elliott wave. Far from the truth, as I believe that many of the waves that we count are a reaction to important Fibonacci levels that exist in our markets. Without those projections, many find themselves extending their tops or bottoms for years as the market moves towards its projections.
Below is an updated SPX chart along with my proprietary Fibonacci studies that the SPX has followed so well. It clearly shows how the market went to test 1290.50 again before vaulting to the upper target at 1317. I have been hoping to reach the 1360 area, which is now a reality. The current diagonal pattern that many now see won’t reach it. We either are about to expand on this current pattern or we will miss that target by a few points. At this juncture in the market it would be foolish to try and get every drop out of it.
I am, for the second time since 2002, looking to go bearish against the 1326 to 1360 area with a more precise price and time target, which are reserved for members. The previous time was in the first half of the year, we were waiting for a top on or about May 8 to 12. We nailed that one perfectly and then became bullish slightly after the July lows, as that drop became corrective and recaptured the 1245 region.
We are once again in a region that we think we can safely start to predict a top.
Let me make one thing clear as I write this, there is no confirmation that a top is in, we are only preparing and waiting patiently. Many other markets still need some higher moves. As said last week, I have a Sept. 22 CIT, along with some great price targets to watch for. With respect to current members and the risk of posting price levels that will get adjusted at such an important turn, I must keep them within the forum.
Sentiment once again is starting to feel the way I want going into this area. The shorts have covered through out this grinding rally and a few have even turned bullish. Bulls are quite comfortable and might over stay their welcome.
So why isn’t this rally going to 1400 and then 1500? I’m sure most trend followers can find reasons to stay bullish as they watch a MACD screaming along with this move. The next chart is one of the reasons why I am making a case for an important top here. It is a daily continuation chart of the S&P futures. Where is the fuel in this market? Take a look at the lower indicator that measures up/down volume. Not exactly what you want to see as we are making new highs. It seems as if the futures have a lack of sellers rather than an abundance of buyers. The pit traders can feel that, and unless something drastic happens soon, it won’t be the time to chase this market.
There is also an A/D line that Bob Carver, one of our Market advisory members, has constructed that paints a very different picture of the market’s Breadth.
Compared with the traditional NYSE Breadth chart, it is severely lagging against price at this high. Here is that HYPERLINK "http://www.tradingthecharts.com/phpBB/viewtopic.php?t=889" \t "_blank"chart.
The OEX chart that I had been updating has also reached its cluster of targets along with a diagonal “overthrow.” Here is that HYPERLINK "http://www.tradingthecharts.com/phpBB/viewtopic.php?p=17874" \l "17874" \t "_blank"chart
We head into a busy week with a Fed meeting on Wed, a CIT on Friday and a Maturing Elliott Wave structure. We left the SPX 3 points above the 1317 area on Friday so it will be easy to minimize risk in whichever direction we trade. Vibrating around the 1317 level gives more validity to the 1360 target, while a clean break below it, will either confirm a high is in place or a corrective drop into the larger pattern.
Ideas from this update are provided as general information and are not investment recommendations. TTC accepts no liability whatsoever for any losses resulting from action you may take based on the contents of its charts, commentaries, or price data. Each person must do his or her own research to determine the appropriateness of taking a position in any financial or commodity market. If you are uncertain, please check with your licensed financial advisor or broker prior to taking any action. Securities and commodities markets inherently involve risk.