S&p 500 - Daily (log Scale): Alt ( W )

S&P 500 - Daily (Log Scale) (Y)

(Z)

“c”

( Z )?

“a”

(X) alt ( W )

“b”

(W)

957

“c”

869

“a”

(X) “b” The market action this week was very damaging for bulls. The long term trend lines from the March lows have been broken. It’s possible that we get more Z-wave action in the form of a triangle. In fact, that would be a classy way to end a “triple”--with a congestion pattern that just “exhausts” itself. A break of 1020 would negate this possibility and confirm that a much deeper correction is unfolding. 957 would probably be the first point of medium term support as the 61.8% retrace of the move from 869 that “coincidentally” aligns with the “breakout” over the June highs.

S&P 500 ( 30 min ) - Bearish “Impulse” Lower (a)

-2(c)

If this was an impulse, the market should not be able to clear 1076, the 61.8% retracement. Any retracement must look “corrective” in nature.

1076 -1-

(b)

2

-4-?

(2)

(1) This is a strong candidate for an “impulsive” move lower. There are some satisfying things about this model: The wave-2 was 62% of wave-1. The wave-3 extended over 162% of wave-1. The potential wave-4 retraced an exact 50% of wave-3. Something that gives me reservations about this model: The wave-4 was a very sharp looking move, not exactly something that looks like a fourth wave. However, we do have “alternation” between Wave 2 and 4--they have different structures and one took much longer to complete. So, it meets the requirements. It’s also possible the Wave -4- is still forming.

-4-?

(4) (3) (5) -3-5-?

1

S&P 500 ( 30 min ) - Complex Correction Lower [a]

(a)

(b)

Under this model, the 1054 zone should be some resistance as the 61.8% retrace of the most recent move lower. Also, if this is a complex correction, it should “channel” lower more neatly than an impulse. So, would expect the downtrend channel to contain the move.

[c]

[b]

-x-

[2]

[1]

(b)

[4]

1054 [3] Because of wave-4 issue identified in the previous bearish “impulse” model, we’ll keep tracking the alternative case that this is a “complex correction” that has formed. Just because it’s possible that this is a corrective vs. impulsive move does not take away from the bearish implications. A double or triple zigzag can be just as devastating as an “impulse.” A triple zig-zag can look a lot like a “waterfall.”

[5]

(c)

-w(a)

(c)

-y-

S&P 500 Daily with RSI (14)

Look how the Daily RSI kept setting new lows as the market was setting new highs. This is a picture of market getting “stretched” and losing energy.

S&P 500 with the 20 month Moving Average

This is a popular moving average followed by some famous technicians. It held on a closing basis this month. There was a violation within the month, but that now looks to be a a false break, something that occurs often in Moving averages that are followed by the “public.”

Transports were the “canary” in the coal mine with this ugly engulfing candlestick.

Dow Jones Industrial Average

Dow Jones Transportation Index

These are Weekly Candlestick Charts. Dow Theorists would refer to this as a “Non-Confirmation” of the Transports. The Dow Jones Industrial Average made a clear new high, but the Transport Index failed to perform anywhere near as well. It actually “double topped” against a previous high. This is considered very bearish.

Nasdaq Daily (Line on Close)

Becomes Resistance

Previous Support

Very classic charting concept displayed here. Levels that were previous “support” for the market should become resistance later on any rebound.