Another “fun-Friday!”

Let me start out by saying that Friday’s action could have been better, but it could have been a whole lot worse.  The markets pushed up in the larger retracement that we had expected, though not preferred.   The $COMPQ moved up into the range of the previous 4th wave, filling the gap of 2417 in $COMPQ.  This is a good sign my friends, a good sign.  We also have retested the break-out of the up-sloping trendline, but have not been able to get back above it at this point.  Another indication that the larger decline should be quickly accelerating.

While certainly not my favorite scenario, today’s action certainly has some strong points for the bears.  One is the filled gap I discussed earlier this week, there remains only 1 upside target in the $COMPQ if it is to remain below it’s 8/15 high, and that is the range between 2430 and 2445, which represents the 38.2% and 23.6% retracement levels.  As previously noted, the $COMPQ prefers to spike its targets, so the upper level is where I will be watching closely for a reversal.  The blue lines are common EWT targets for wave 2 retracements as far a pattern standpoint, as well as the fibonacci retracements.

Second is the volume.  What volume you ask?  That is my point, “What volume?” Don’t tell me it is a seasonality, that is a load of crap.  Just look at last year in August.  On the $DJI that is the highest volume August on record.    Today was about tied for the lowest volume day of the year…with yesterday.  And one of the lowest volume days since 12/24/07.  Speaking of that date, Christmas Eve represents a great fractal perspective.  Of the larger first wave, termed (1) in the proper Elliott nomenclature, 12/24 is in the same place we suspect this market is in right now.  That is, a 1-2, i-ii.   Our location is very similar, except inside wave (3) rather than (1).  When you combine the placement, as well as the large scale volume contraction, the markets appear quite ready to fall from near-current levels.  The bulls will tell you otherwise, and I cannot say that the breadth today was not overwhelmingly bullish.  I can only tell you that this 200 point move up in the $INDU, was met with no fear and made by no volume.

A nice picture of the retest…

The third point is my favorite.  Yes, you guessed it, the $VIX.  This little bugger is fantastic for marking reversals.  It is not screaming as loud as Mole’s first born that was auctioned off at a poker game, but it is clearing its throat.  I suggest you take a nice look at this, even take a picture of this chart, because it comes in handy.  The red circles are confirmed sell signals, the most accurate of the $VIX signals, while the purple circles are unconfirmed sell signals.  Notice there are not very many purple circles.  The green circles are confirmed buy signals, while the teal circles are unconfirmed buy signals.  There are more unconfirmed buy signals than anything else on the chart, and the total buy signals (confirmed or not) out number the total sells by nearly 2.5:1.  Just ignore the large red lines right now, as they remain on the chart for overlay purposes.  Horizontal lines are important S/R points, and the lower channel is what I refer to as the “bull-market” range.  

That said…I leave you this weekend with a beautiful fractal relationship in both the $INDU and the $VIX, as well as being .25 points from pushing outside the 2.0 BB, which would be the first inclination a sell signal is brewing.  We do not need a sell signal to start this leg down, but it would be the ultimate in confirmation.  If and when this does happen, I will go over the requirements for confirming the $VIX signals.  I also leave you with a stong advance on no volume, and a push up into our reversal range, as well as a retest of the break-out line.  All things considered, we should have an intersting next week or two.  Stay posted as we will certainly keep on top of this.

Enjoy your weekends, I will be enjoying mine… 😉

Skål!