Tuesday, August 23, 2011

Market Technicals

There is a bear flag developing on stock index futures' 4 hr chart. Yours truly has no idea where we are going during the day, but I do know we are heading down from here in the next month or two. Bear flags are precursors of a measured move down. Flag pole distance is 95 points on $ES_F which would imply a move down to 1051 (based on current top of the flag @ 1146). You will need to adjust the numbers as they fluctuate, but the picture remains the same, as long as we do not trade and close above 1153.25
Bears are clearly in full control of this market. Longs would rather hope that this is a correction within a bull. Their hope is the fact that S&P500 and Dow did not make new absolute lows below 8/9 low. But we had a new weekly closing low, and Transports and Philly SOX made new lows. Somehow I am not sure that the bull is alive. If we do not reverse the negative news flow, then I do not think that 1051 will be the absolute bottom. If we completed a bull market 5 wave move at 1370, then this is just a first wave down in a bear. Can you folks imagine where we will complete this move?? Scary to think. I have a 943 SPX target on my list. But let's not get too far ahead of ourselves. There will be another vicious bounce or two on the way there. Just like we had on 8/9 - 8/17.

Good luck!

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