Sunday, July 4, 2010

S&P500 short-term: Breakdown towards 950-960

Last post on the SPX, outlined the price action then as bearish, with stiff resistance at 1100. Since then, the index has not looked back and continued down to break below the crucial 1040 area. Oversold manages to remain oversold, which reeks of bear market behaviour (remember how overbought remained overbought on the way up?). Let's take a look at the daily chart.

Medium-Term: Head & Shoulders Target = 860

Although, the right shoulder needed a bit more sculpting, it is close enough to be called a H&S, with volume confirmation. Hence, we are looking at a medium-term target of around 860. Of course, this is the ideal scenario, and the market has to oblige!

Very Short-Term: Immediate Target = 950-960,

This is based on the recent high of 1031, and the wave structure of the decline on the 30-min chart below, lends support to this target.

The decline so far from the B high has an impulsive look, and has completed 4 waves. Expecting one more move down to the 950-960 area, before a significant rebound.

Wave Counts

Maintaining the A-B-C count for now. If it is so, i expect the decline to end around the 950 area(within the corrective channel in red), especially if we subsequently break through 1040 upwards.

Instead, an extended consolidation remaining under 1040, followed by a sharp break below 950 would suggest we're in the alternate wave count suggested in the last post, with very bearish implications (Prechter point!).

The range now is between 950-1040. I await the latest sentiment readings - could provide vital clues in the short-term. All the best & stay safe!
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