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From last night's update: No report on Thursday.
Review of previous night's notes and today's tape: The indexes finished a pretty impressive week as they used the 10/2 lows as a springboard for the Dow to make new closing highs for the rally. Everything seems in line for the next pump for the Dow 10K. But there are some warning signs that are questioning the longevity of the stay up here, if we do see further strength in early trading next week.
There is an intermediate term turn date set for anytime between Monday and Wednesday. It is scheduled to last until mid/end of November and may be the most severe pull back we have seen since the March rally began. It may finally offer the 38% retracement that many traders have been waiting for and possibly a little deeper. This is lining up with our October sentiment data.
I am sticking with the Primary ABC wave count with the March lows being primary wave A and we are currently in the primary wave B. Once wave B completes, we should see primary wave C take the indexes back down to and most likely below the March lows. But with new market timing information I was studying over the weekend, I thinking the wave B may take a little longer than many bears are hoping for.
The charts are still calling for this next leg down to take the spx down to the 920-860 area where many long term Primary wave 3 bears waiters will ink the massive collapse of our financial markets. If our charts prove out to be correct and we see the move down to the 920-860 area, I am thinking that it will be a W of the ABC move of primary B.
If this roadmap if correct, I would label the highs left behind wave C (W) of an ABC move, with the potential November lows being wave (X) and then we rally into the summer of 2010 to make wave (Y) and complete primary wave B. Now this is a long term roadmap and may have to be adjusted or completely thrown away if the charts are telling us something is not correct.
Instead of labeling all of the counts, I have attached a chart with what I see taking place. The moves will most likely be supported by father Fed pumping more liquidity into the markets as well as new money that has been waiting for the pull back to get in this market. LQD and JNK are supporting the timing data as well as the sentiment data for the larger pull back that is looming in the air. LQD has broken down and that is telling us that “RISK” Is leaving the markets. If history is guiding us, the indexes should soon follow the “risk” leaving the markets, as it has every other time LQD starting breaking down.
Bottom line: With the upcoming turn date and LQD breaking down, I am expecting a much deeper pull back to hit the tape as soon as Monday.
Mel’s Corner: This is going to be a new addition to our site for any members looking for the next day’s trend through a unique system designed by Mel.
Numbers range from -20 thru 20. -3 thru 3 are "null" signals.
Negative numbers are bearish, positive numbers are bullish for the next trading day.
Mel’s trend finder indicator gave a -11 reading tonight, which is a sell is reading for the markets on Monday.
Sentiment Indicator: (contrarian indicators) The short term sentiment indicator (1-3 days) is in extreme bullish territory. Intermediate term sentiment indicator (5-10 days) is in bullish territory. The longer term sentiment indicator (3-6 weeks) is in neutral/bullish territory.
Bottom line: With the short term in extreme bullish territory and intermediate term in bullish territory, we should see the indexes start to head lower. We may need the intermediate term indicator to get to extreme bullish territory before the turn.
"Smart Money" Trend The smart money was fairly quiet on Friday, but a majority of the spikes were on the sell side.
For Tomorrow: Support for the spx sits at 1062-1060 and then 1056. Resistance pivots are at 1076-1078.
Gary
ETF’s we trade: Ultra S&P500 ProShares (NYSE: SSO) Ultra Dow30 ProShares (NYSE: DDM) Ultra QQQ ProShares (NYSE: QLD) PS UTLRSHRT QQQ (NYSE: QID) UltraShort S&P500 ProShares (NYSE: SDS) UltraShort Dow30 ProShares (NYSE: DXD) PowerShares QQQ Trust (NASDAQ: QQQQ) Direxion Daily Small Cp Bear 3X (NYSE:TZA) Direxion Daily Small Cp Bull 3X (NYSE:TNA)
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