Where we at?

Here are several charts that describe my thoughts about the market here.  There is one remaining bearish count, though I wouldn’t give it very much credit at all…  Not that the count is not valid, but it is “stretching” the rules (quite literally).  Now, if we had market internals signaling a massive bear run, with a total end to any upside momentum, I would give it a little more credence, but still not enough to validate it as my top count.  As we know, that bearish count is a series of 1-2s with some already creative counting.  Forget a leading diagonal (especially if you have to make it an expanding one) for the move down, and forget and ending diagonal (especially if it is an expanding one) looking for one last high up.  Those are almost completely out of play.  Two much more realistic bullish counts are that we had slightly mis-labeled the “A” wave peak (per my charts) and that we are finishing a “C” wave up of the (Y) wave of the double zig-zag.  The other, and in my opinion, slightly higher probability bullish scenario, is that we had dropped in another (X) wave (which is complete as of Friday, or of which we have completed the “B” wave, looking for slightly lower lows to come) in which case we should be looking for this rally to push much higher (in conjunction with the $VIX buy signal, and expanding breadth) in an “A” wave to start us off.  With both advances (double or triple zig-zag) we should be targeting 1100 first (I know, I know, no shit) all the way into 1125 for first targets.  That price range would complete the double zig-zag.  Then we should drop back in either the resumption of the downtrend, or fall slightly back in a “B” wave, before blasting up towards 1200, the only other logical target in the range.

This shows the working bullish counts

The chart above maps out the most likely bullish scenarios.  We will have to see how the market reacts in the “red zone” to help us gauge whether we have a double or triple zig-zag.  Below is the only remaining, and low probability, bearish count.

The only remaining bearish count

Even if we are not dropping straight to hell, this scenario offers us a very nice low risk short entry.  A gap fill would look pretty easy here.  Now, if we can’t fill that gap, we sure as hell are going higher.  We will reassess our counts again if and when we get there.

Now I have a little bit of support for the bullish case, especially when you combine it with the Daily Zero.

Regression channel break pattern

If we get above the 2.618 projection of the regression channel, all bets are off for the bears, as we are likely already rocketing to higher highs.  The next chart gives even more support to the bullish case in the face that we are now using a fib level that acted as resistance as our support.  Not a good sign.

Old resistance becomes new support

That being said, it might be prudent to get long a couple of high beta stocks for the last (1-2) move(s) up.  I personally bought a small position on the BIDU break-out yesterday.  As before, I maintain that this guy can get to 430-440 without much trouble, especially running up into earnings.  AAPL sported a nice break-out too, but is a little far gone (IMO) at this point.  GOOG is also showing us a reasonable break-out, with a modest target of 530.

Now these are just my thoughts.  I know many of us out there are still holding out that we could be dropping hard from here.  As stated, the possibility does remain, but there are a few “errors” in that count, whereby there are no errors in either the double or triple zig-zag scenario.  I know that many of you are getting frustrated trying to count the waves.  It is never as easy as it seems, and especially not at crucial junctures in the market.  Hang in there, the true count WILL reveal itself.

That’s your morning update by the Berkster.  Enjoy, and good luck all.