Thursday, November 19, 2009


Most of the day was consumed tracing out a bear flag. A traditional bear flag would have a target of about 107.9. But this bear flag looks like its a wave 4 (with wave 3 being the gap down and fall this morning). The target for wave 5 would be about 108.8. The trouble is the counts are very cloudy right now.
We still have a positive divergence on the VIX dailies vs the SPX. The VIX retrace was a little disconcerting. Not shown in the above chart but the retrace down intraday on the vix was exactly 61.8%. This is an interesting point for the VIX to reverse back up.

So in conclusion I expect it to be down Friday initially...then a rally recovery...followed by more down into Monday for a short term low (>103)...then more rally potential into Thanksgiving and afterwards.

Below is a bonus chart:
The dark line is SPX:GLD while the pink line is the SPX. Note that they more or less trace each other up to September. At that point we continue to rally in the SPX...but relative to GLD we have been in a decline.

This is bonus chart #2:
redvetttes has brought this to my attention. The 3 month tbill is wacky all of a sudden...showing the behavior we had during the credit scare last year.

11:51 edit: There is an outside outside chance that we could fall sharply tomorrow and then have a major collapse Monday (black mondays always started with down Thursdays). I give this about a 1% chance right now. The counts don't support this and the only reason I bring it up is because of the the Tbill chart above and a move to the upper BB for the VIX daily.
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