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.