Here’s a thought…

Berkster in.

About a week ago when our original standard retracement levels for the $SPX werer broken somewhere in the range of 1050-1060, depending on how you figured, I mentioned to Mole that there would probably be another drop coming to sucker in all the bears.  At the time, I figured we would just barely breach our line’s in the sand, and pull a full reversal, confusing everybody.  Well only today did I see what was really planned, and damn if is ain’t devious.

First off, a little chart with no lines so you all will be blind but know exactly what I am thinking.

What am I thinking?

Depending on how astute you are at TA, a number of things might jump out at you.  You could call than and inverted H/S, but it’s not in a downtrend.  You could call it a double top (which it is right now), but we have a little ways before we can get any type of confirmation (from a purely pattern perspective).

Now put your evil caps on, a take a hard look.  If you were a market-maker, what is the worst thing you could do?  My guess is give the bears a false break-down, give the bulls a false break-out, and then fuck the bears on last time with a modest new low.  From an EW perspective, a flat.

Too easy, right?

Obivously, we could push a little bit higher and this pattern be valid.  What I like most about it though is A) the simplicity, B) the evil, and C) the evil.  Wouldn’t that just be disasterous.  As we get a tiny new high (in some markets) we trace out a clear 5 waves down (in a C wave) only to blast on higher in either A) the C wave of the last zig-zag in wave (W) or B) the A wave of (Z) in a triple zig-zag.  I have it labeled as an (X) wave on my chart for two reasons.  From the fed day peaks, this pattern would fill out a month quite nicely, and still count as a correction.  The previous (X) wave took just about a month to complete, and we know how the market likes to repeat itself.  Finally, if we could get another drop here, it is likely that we would get at least a single divergence in the indicators I mentioned last night. What seems to be clear (at this point) is that we are falling in 5 wave moves and that we are finally getting some gap filling exercise.  Next target, 1056.28 ($SPX), followed by 1040.22, and finally, 1024.89.  Yes, if you look close, there IS another gap in there, but IMO it is of less signifigance.

Let’s take a quick look at the way the stocks I mentioned this mornging behaved.

BX-

We'll see what some OCT calls can do...

BIDU -

Got a nice move down, then another, now I need upside.

LVS -

The Ugly.

Nearly all of the stocks I mentioned this morning had there little pops (or drops), but as I warned, no volume on these guys.  Gotta see where the market drags our balls tomorrow, but I must say, that I will be more intrigued tomorrow than any day for the past week or so.

With that, Good night all.

Berkster out.

This entry was posted on Monday, October 12th, 2009 at 10:41 pm and is filed under Elliott Wave Theory, Market Outlook. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.