Choppy flatness

Of interest is the linear regression line from August 6 (shown in the chart as orange), where I believe the first Elliott wave down from the all-time high completed. That regression line has a measly -0.3 slope indicative of how “flat” the action has become – even though to get to this point we’ve gyrated tremendously. Choppiness resulting in an overall flat market is one of the trademarks of a contracting triangle (green lines on chart). With the technical indicators I follow still bearish I’ve got to stick with the idea that the next move (thrust) out of the triangle will be down. The moving averages (blue line) on both the daily and weekly (not shown on the chart) time frames are giving resistance today at 1470. A Gann line lies there as well and the 78.6% retracement of the last swing is in the immediate vicinity.

With the Globex futures already up 12 points, it looks like we will either reverse off of the opening pop or my scenario will be blown out of the water.

Show me the $$$

The intensity of the rally surprised me yesterday. However, the volume and market facilitation index were both lower indicating that there may not be "legs" to this bounce. Combine this with the fact that the negative reversal in the RSI is still in play and I have to stick with the bearish side here. Bottom line: It is now up to the bulls to convince me otherwise. Actually, all they have to do is hit my stop. :)

Unless the bulls can take out the August 24 high (in the cash S&p500) I consider yesterday's bounce as wave "b" in a larger a-b-c pattern unfolding from the August 24 high. In turn, that a-b-c pattern will form wave "d" in the ongoing contracting triangle scenario I have been following.

Watching Momentum

It certainly looks like the "c" wave up from the Aug. 16 low is complete. Now we have to watch for the development of legs "d" and "e" per our Elliott Roadmap (from an earlier post). Of course, the "c" wave may have ended the correction in which case a new pattern has already started. In either event I believe the market is trending downwards.

Over the next few days I will be watching momentum like a hawk. The chart at left shows the RSI (top) vs. Price (cash S&P500) on a daily basis. Will momentum follow price; or will price follow momentum; or what? So far price is leading and we'll be watching for any divergence to show up which may put a damper on our bearish leanings. The weekly and monthly views will be just as important and I'll post them over the next few days.

Close Enough?

The chart has been updated with the price action while the price targets (blue ellipses) for yesterday (first shown a few days ago) are unchanged. We hit right between the two. I would have liked to see the high "in" the ellipse; but, as the Rolling Stones are fond of saying, ".. you can't always get what you want."

We did have a negative reversal in the RSI (RSI value higher on Friday's close than on the August 8 close while price was lower). The minimum target works out to 1388. This time the reversal is being confirmed by my second momentum indicator.

Finally, yesterday's price bar was day #2 in a Robert Miner "Snap Back Reversal" pattern. And so, I have to lean towards the view that the "C" wave rally from August 16 is complete. If this view is correct we should break the August 16 low without exceeding last Friday's high.

Watching and Waiting

Nothing has changed over the past two sessions to alter my view on the cash s&p500. Today is the "roadmap" day for a high. Let's see what happens.