SPX and BKX Update: Next Move Should Be Lower

While virtually every technical analyst on the planet is watching the bullish triangle "continuation pattern" that's been forming in the indices all month, I have stated on several occasions that I don't think it's real.  After studying the price action of the last couple days, the triangle has not displayed the proper form, and the volume has not performed according to the pattern.  Volume should be diminishing as the pattern forms, but has been rising instead.  Doesn't mean it can't be a statistical outlier, but I am cutting my odds on the triangle from 20% to 15%. 

This is of course, the "all clear" for the triangle to break-out tomorrow and humiliate me (cue music from Jaws... visual: triangle rising from the dark waters and ripping analyst to shreds).  On the flip side, if I'm right, I should get a cookie for digging into the charts and breaking from the "easy answer" analysis.  Keep in mind that if this move down is somehow Wave e of that triangle, there may be a strong whipsaw below the lower triangle boundary and back up into it.  While I think it's low probability, be aware of it and respond accordingly if necessary.  Below 1215 would completely eliminate it from consideration.  For the triangle chart, please refer to yesterday's article.

Yesterday, the market performed exactly as the charts predicted.  So did the news, as I also opined that the Fed's sudden talk of stimulus was an attempt to front run a bad news event.  There's an age-old debate between fundamental analysts and technical analysts over which is more valuable, news or charts.  As a technical analyst, while I do believe that fundamentals are important and a driving factor behind the charts; I also believe that the charts are forward-looking, so with rare exceptions, news is noise. If you look at the charts I posted in my prior article, every one of them predicted yesterday's sell-off perfectly -- and I drew those charts long before the news (which allegedly sparked the sell-off) was released.  Funny how the charts knew ahead of time what was coming.

This is one of the reasons I often laugh when I see the headlines on CNBC, trying to explain why the market did what it did each day.  You see things like:

Market Sells Off on Renewed Fears Over Europe; which is followed the next day by:
Market Rises on Renewed Hope for Europe; which is then followed by:
Market Crashes as Investors Are Overcome by the Nagging Sensation That They Left The Stove On

It's all nonsense.  The market does what it does because humans follow patterns in their psychology and decisions; so the exact same news can be perceived as negative one day and positive the next.

I continue to believe that October 27 was an important top.  I have one count I've been favoring for some time now, but this count does allow two possible resolutions over the short term.  Those possibilities haven't changed since last Thursday, but I have consolidated both possibilities to one chart.  The burden remains on the blue count to prove itself.  It needs to begin making some marked progress in the downward direction.

The blue count shows the market forming a subdividing series of first and second wave (or nested waves, as I prefer to call them), which would lead to new lows fairly directly. The black count shows wave (ii) still in process.  Trade above 1260 would be the first clue that the black count might be unfolding.

The Philadelphia Bank Index (BKX) is another that's performed perfectly in line with expectations, so far anyway.  I posted a chart two days ago showing my projected path for the BKX, and would now like to update that chart with the recent action.  None of the projections have changed yet:

The fly in the ointment for the bear count is the specter of Fed intervention.  The credit markets are beginning to show extreme stress, and the Fed has talked up stimulus recently.  Fed intervention could blow this count up.  While news is noise, the Fed is liquidity -- and liquidity drives the markets.

Another potential issue for this bearish count is that the sideways market has been burning off bullish sentiment.  This is not something bears want to see.  The latest AAII sentiment survey came in at 41.9% bullish and 31% bearish.  That's a 6.5% jump in bears from the prior week -- which actually represents a 26% increase to the total number (from 24.5% to 31%).

Long-term, I remain very bearish.  I believe that, one way or another, Minor Wave (3) will carry stocks to new lows.  The biggest challenge in deciphering the short-term turns of late is that the market has been forming multiple zigzag patterns within a trading range.  Double and triple zigzags are among the hardest patterns to predict and project, since they have very few rules; and trading ranges give you nothing in the way of meaningful price points.  I assume these patterns are a reflection of the extreme uncertainty present in market participants. 

We would be fools to ignore market signals and new price data when trying to determine the market's short term path.  Despite whatever I "think" should happen at a given moment, I try to respond as objectively as I can to the charts as new information becomes available.

I am severely handicapping the triangle as a true possibility, but that doesn't eliminate it. The triangle is still within the realm of possibility, and might be the "Fed intervention" pattern.

My strong belief that we're headed lower in the near future hasn't changed.  The key levels to watch are still SPX 1215 and 1190.  Barring some type of central bank intervention, or the significant threat of such, a break of those levels should lead the SPX down into the low 1000's.  Trade safe.

The original article, and many more, can be found at http://PretzelCharts.blogspot.com 

SPX Update: The Picture is Again Becoming Clearer

For once, what I found most interesting about yesterday wasn't the charts. It was the push that suddenly materialized from the Fed to assure the market that the stimulus guns were ready, and loaded for bear.  I found that quite unusual, because the Fed meeting was barely two weeks ago, and they decided "no stimulus."  Are we to believe that the Fed governors suddenly woke up yesterday and randomly said to themselves, "Sheesh, well, THAT was a bad decision."  Hardly.

This concerted "feel good" effort seems to hint that the Fed is aware of some pretty bad news lurking on the immediate horizon; and they're trying to reassure the market before this news event hits.  I can't see any other logical explanation for the sudden about-face, and ensuing media blitz, in light of current events.  It's not like the market is cliff-diving at the moment; and it's not as if the economy got significantly worse in the lengthy span of two whole weeks.  No, I'm pretty sure they must be front-running some piece of bad news that has yet to reach the public; or perhaps it's something that's already there (such as the stress being shown by the credit markets), but hasn't sunk in for the public yet.  Either way, it's an unusual and telling move that indicates underlying issues may be worse than they seem.

In other news, I've just been handed a short note from the Horn Tooting Department, which mentions that yesterday's BKX count and chart has so far played out to a tee -- although I missed the exact bottom by 17 cents.  Hopefully, some readers were able to take advantage of that setup.

The charts are finally starting to narrow down some of the possibilities.  The "simple" explanation that most chartists are looking at is the potential triangle continuation pattern that's forming.  This would be bullish for equities, and implies a move higher.  That's certainly possible, but based on the best analysis I've been able to muster by examining numerous markets over the past few weeks, I find it less likely.  That could always change as the market gives new information in the future.

I still favor the bears here, as I have since October 27.  If the bears can get through the bulls first two lines of defense, SPX 1,215 and 1,190, they should be able to take the whole cake, and run this market quickly down to new lows.

Unfortunately, I can't tell you exactly what the market will do next.  I can, however, present a few things to watch for.  Since I continue to favor a bearish resolution, and continue to believe that October 27 was a meaningful top, there are two potential bearish resolutions I'd like to share here.  Both are counts we've been watching for a few days, but I want to share with you how they could diverge in the next few days.  The first chart shows the move as a series of sub-dividing waves, each forming a smaller first and second wave.  This count is just about out of time here, and needs to accelerate lower almost immediately, or it will lose plausibility.  The chart says "today," but today/tomorrow would still be passably acceptable.

The alternate bearish count is shown in black on this chart, but is detailed in the second chart.

    
The second chart shows another way for the bearish count to resolve.  The potential currently exists that the market is forming a double-zigzag formation, and I have drawn-in a likely way for that to play out.  I am starting to grow fond of this count, as it would cause the greatest confusion to all players with a head-fake triangle breakout.  This count also foresees downward movement from the market today, but instead of accelerating, it would then stage a rally near the lower triangle boundary:

I believe the market will seek one of those two resolutions in the coming days.  Both are quite bearish, and would both call for significantly lower prices once this correction is over.  I continue to favor a bearish resolution by an 80% margin.

However, if in the event I'm wrong, readers should be aware of the bullish possibility, should it start to unfold.  The bullish resolution is what many players here are expecting, as triangles are continuation patterns in the vast majority of cases.  I am handicapping this scenario at 20% odds; in other words, I think the triangle is a "fake."

Of minor note, this triangle is consummate with the expanding ending diagonal alternate count we've been watching for weeks; it's simply a different way to chart it.  Since the triangle has become so prominent in the charts, I feel it's more prudent to address the market in these terms going forward.

As I have stated repeatedly, I continue to be bearish at this juncture, whether that comes by way of the first chart or the second.  If the first count is to play out, it's do-or-die time, so today should answer the question of whether this ends immediately, or drags out for a few more days.  The bullish count is presented, not because I think it's likely, but because sometimes I'm wrong.  Trade safe.

SPX and BKX Update: Market on Hold, Call Again Later

Yesterday gave us nothing in the way of meaningful price data.  In a range-bound market, a day that stays well within that range doesn't help much.  So the crash count is still out there -- but the market has really moved no closer to it and no farther from it, as not one key level was violated in either direction (this applies even to short-term levels not outlined). 

Materially, there is simply not much to add to yesterday's counts.  The short term structure is still an ugly mess, and leaves a lot to interpretation.  The biggest challenge is that the structure is vague enough that it's very difficult to zero-in on minute knockout levels.  The key levels to validate the bear case are still 1215 and 1190, the key level for the short-term bull case is still 1292.  There has been nothing to change my opinion that we are forming a significant top.  My preferred view is that the top was made on October 27.

By now, all my readers know I have been strongly favoring a bearish resolution.  During Monday's session, crude oil added further weight to the bearish view.  On Friday, I presented some charts and a real-time update on the oil market, and opined that crude would put in a top either that same day, or on Monday.  So far, it appears I may have nailed it... we'll see if the market continues to play along.  Crude traded down throughout virtually all of Monday's session, and seems to have traced out a first wave lower.  Crude and equities have traded in pretty good lockstep for some time, so crude may well be leading the way lower for equities here. 

At major turns, there are endless potentials.  As I just mentioned, I am still favoring the bearish resolution by a large margin, as I have for several weeks.  But I must stress there has been no objective confirmation yet, since 1215 and 1190 still haven't been broken.   

Sometimes novice traders get annoyed with this type of market and demand that someone tell them whether they should be long or short.  There is a problem with this type of thinking, and it's one of the reasons 95% of traders go bust: long or short are never the only two options. Cash is a position, too, and if you, personally, are unable to trade a manic market like this, then it's usually the best position.

In range-bound markets, there is an interesting dynamic that comes into play with traders, and it can be described with something called Prospect Theory.  Prospect Theory has shown that people become risk-averse when facing a gain, but they become risk-seeking when facing a loss.  This is why many traders tend to hang on to their losers longer than they hang on to their winners.  A losing trade actually makes people take more risks than they should, and this mentality seems built-in to our psyches.  Conversely, when people gain a small profit, they become anxious to protect it.  As a result of this psychology, people tend to trade in exactly the opposite fashion of the manner that's profitable. 

The profitable manner is:  cut your losses and let your winners run.

It is this same psychology that causes this type of market to wear people out... the bears get more exhausted on every rally, and the bulls get more exhausted on every drop.  Eventually, one side -- either the bulls or the bears -- throws in the towel.  I believe Prospect Theory helps explain these types of markets, and their eventual resolution.  Here's how: 

Let's use the example of a bull who buys some stocks at SPX 1280, and the market heads down immediately after his purchase.  He is facing a loss, so according to Prospect Theory, he becomes risk-seeking, and hangs onto the trade "hoping" to get even.  Though his account is at a loss, eventually the market rallies -- and now he's getting close to even... but then suddenly the market sells off again.  Next time it rallies again, he will now be willing to sell for a loss, and a bigger loss than he would have accepted on the first run up.  The same happens in reverse for the bears. 

I think this psychology is a contributing factor to contracting triangle patterns... each time the market runs up, the bulls who rode the elevator down are willing to sell for less just to get out, and each time it runs back down, the bears who rode it up are willing to pay higher prices to cover their shorts.  So the price points gradually converge: highs get lower, lows get higher, because both sides are feeling beat up.  Eventually, when enough traders have cleared out from one side of the trade, either buyers or sellers, the market finally breaks out of the pattern.  Who wins will come down to which side has more conviction.

Alright, on to the muddled charts.  I'm not going to present all the charts I presented yesterday, so if you didn't read yesterday's update, you could do so to familiarize yourself with the potentials. 

The SPX chart is still not terribly helpful over the very short term, I'm afraid; short and intermediate term potentials are too plentiful right now.  My projected resolution to the pattern is for the market to turn south without breaking 1292.

The short-term bullish count I want to call to everyone's attention to again is the triangle, since it is readily identifiable.  Some added information: the triangle count posted yesterday could be complete, or could stretch out further; if that's the resolution the market is seeking here. 1215 remains the knockout level for the triangle count.  Also important to note is what I wrote yesterday:

If this is occurring, it usually plays out as a false breakdown from the triangle, in wave e (see chart), then whipsaws back up into the triangle and takes off upward in wave C. It's generally a strong rally out of the whipsaw, much like we saw on October 4. Be cautious of this, because you can see it when it happens, and there is no reason to get caught on the wrong side of a move like that (below). 

While the short term SPX is a mess, there is a potential setup in the Philadelphia Bank Index (BKX) that's worth noting.  The short-term count here seems a little clearer than the SPX, but I would still rate it at only 60% confidence.  However, if the BKX rallies Tuesday/Wednesday, this setup might be worth looking at.  The chart below describes the setup.  Within the blue target box, be aware of the large gap in the 39.40 area that could be filled before the BKX heads lower:

The 10-minute chart (below) shows the short-term targets, if this count is correct:

Beyond that, not much to add to yesterday's picture.  The market continues to run back and forth in the range, and won't provide much in the way of additional clues it breaks one way or the other.  Trade safe!

The original article, and many more, can be found at http://PretzelCharts.blogspot.com 

SPX Update: Crash Wave Still Unconfirmed; Fundamentals Still Bearish

While the crash wave setup remains "as good as it gets," the market has thus far stayed above the key levels I've outlined previously (1215 and 1190) which could actually spark a crash.  After Friday's rally, the market is now approaching the do-or-die level for these bear counts, and the market's short-term future will likely be determined by what happens on Monday and Tuesday.

Bulls received some potential "feel-good" news from Italy over the weekend, as Prime Minister Silvio Berlusconi announced his resignation on Saturday.  He was immediately approached by Greece, who, tired of being upstaged, asked him if he'd be willing to become their Prime Minister.  He allegedly accepted, but was immediately asked to resign. 

George Papandreou announced that he is available all month and, if needed, would be willing to resign from Italy, Spain, Portugal, and "any other European country that wants him."   

Italy officially approved an austerity package, which, in a dramatic and sweeping gesture, suggests that all citizens cut down their intake of Fettuccine Alfredo to "no more than four servings per week, unless it's really necessary."  Government officials voted themselves exempt from this rule.

Nothing here should be a huge surprise to the market, and it seems likely these events are priced in already.  We could see a case of "sell the news" next week. 

The silliness is: Berlusconi was not the real problem in Italy -- and how a "tip of the hat" to austerity will help a country whose debt is 120% of GDP and growing remains to be seen.  The problem seems to be one of debt vs. production, so unless Italy can actually get its economy to expand, there appears to be no retreat from inevitable default.  Italy's total debt is projected to hit $1.9 trillion Euro by year's end, which makes Italy just like The Titanic: "too big to bail."

People often boggle at macro-economics because the numbers are so huge, but it's really not very difficult to understand.  If you understand how to balance your checkbook and pay your bills, you have a pretty good start.  Imagine that you as an individual were earning $4000/month, but your bills were $4800/month.  To make up the extra $800 each month, you borrowed money by obtaining additional loans.  This might allow you to continue meeting your obligations for a time, but unless you can raise your income to meet the $800 shortfall each month, plus the new obligations you are incurring with additional borrowing, you will eventually be forced to default on your debt as the only solution.

This is the situation many countries now find themselves in.  To make things worse, their economies (their "jobs" using the individual example above) are shrinking, not expanding.  To go back to the example of personal finance, this would be the equivalent of you being forced to take a pay cut while your already-unmanageable debt was still growing.  Obviously, this would hasten your trip to the bankruptcy court; and the same is true of these countries.

Whether the stock market continues to take the irrational path of viewing this situation as somehow bullish remains to be seen.  There's an old expression: "The market can remain irrational a lot longer than you can remain solvent."

The charts continue to indicate that the market's next move should be lower -- however, Friday's action raised more questions than it answered, and the mask caused by Wednesday's gap down continues to present a challenge to the clarity of the counts. 

Before the open on Thursday, I warned bears not to get complacent and presented a possible ST bullish count.  This possibility has certainly gained some favor after the action on Friday (original chart shown below):

Compare that hypothetical chart with the current actual chart (below), and you can see why we are now forced to give this more weight as a possibility.  Another thing that adds some appeal to the alternate count shown in the chart above, and in black below, is the potential for a head-fake triangle breakout.  By now, every chartist on the planet has seen the potential triangle I talked about intra-day on Friday.  A head-fake would be a great final-confuser to the move, and ironically, a fake-out like that would actually strengthen the bear case -- as long as it stayed below 1292.66.

While it's certainly possible for the market to roll over directly at the open on Monday, the structure seems to need a little more upside, either to complete blue wave 2 within the blue target box (as shown, it may already be complete), or to complete red wave (ii) (shown by the black "Alt: (ii)" label). 

Sometimes, though, the futures will do the work of completing a pattern.  So the futures could rally at their open, hit the top line, and fall back down, leading to a negative cash open -- which could be the start of the roll-over.  A down-day that breaks 1245 would add confidence to the view that the rally has rolled over. 

It will be interesting to watch what happens here. 

Of course, the potential exists for an upside break to be more than a head fake.  While I continue to only give 20% odds to the bullish alternate counts, 20% still means they can't be ruled out, and the October 27 high remains the line in the sand.

I often compare trading to poker, and one of the examples I've used is Texas Hold 'Em.  Imagine you are dealt a pair of pocket aces -- your odds of beating someone who's holding 2-7 off-suit are fantastic.  Given those odds, you would be correct in playing that hand very aggressively against your opponent; however, that's no guarantee you'll win.  In fact, to the contrary, the odds actually guarantee that sometimes you'll lose.  In trading, that's why you must always take steps to protect yourself. 

Below is the "2-7 off-suit" count.  Whether this count will draw a miracle card on the river here remains to be seen.  This bullish count could stretch the rally up as high as the 1330's.

There is also another chart I feel obligated to share.  While I continue to view these bullish resolutions as unlikely, the market often does what it wants, so it is necessary to be aware of them and play accordingly.  This second bullish alternate is one that generally plays out in a recognizable fashion, and gives fair warning if it's underway.  This would be the option of a wave B triangle. 

If this is occurring, it usually plays out as a false breakdown from the triangle, in wave e (see chart), then whipsaws back up into the triangle and takes off upward in wave C.  It's generally a strong rally out of the whipsaw, much like we saw on October 4.  Be cautious of this, because you can see it when it happens, and there is no reason to get caught on the wrong side of a move like that (below). 

Wave e is completely unpredictable though, so there's no guarantee it will break down.  It could end as early as the mid-point of the triangle, as shown by the yellow target box -- if this scenario were to occur.

So the market has done its best to add confusion to the picture.  As I talked about on November 2:

I'm not saying that the top call is wrong [referring to October 27], just because there're a lot of people joining in now; in fact, quite the opposite: I'm still favoring it. But the market never makes things too easy... so, sometime soon, we should expect a curve ball to throw everyone off the trail.

Now we have the curve-ball from the market -- and the more bullish short-term possibilities, which have never been ruled out, still remain open.  So the question the market has refused to answer remains: is this just a curve ball, or something more?  The key levels to watch for validation of the bear case haven't changed: 1215 and 1190 below it. The key level to watch for the bull case is still the October 27 high.  While I remain in favor of the bearish counts by an 80% margin, deuce-seven off-suit is always out there lurking.  Trade safe.

The original article, and many more, can be found at http://PretzelCharts.blogspot.com

The Shanghai Composite... or something

The SSEC is a bit of a challenge for me to tackle, as I have no access to detailed intra-day data.  Without a look at a 30-minute chart at least (preferably a 5 minute chart), I am unable to differentiate between the short-term structures, and am left with some blind guessing.

The long-term structure appears reasonably clear.  It would seem that 2008 was an A-wave crash, and 2009-2011 have been a B-wave triangle.  The triangle counts reasonably well, and demonstrates the correct 3-3-3-3-3 structure.  Without intraday data, where I run into difficulty is the short-term picture.

Let's start with the long-term view.  I have superimposed the SPX in line-form behind the SSEC, to show that they sometimes trade in concert, and sometimes trade opposed.  Note the SSEC actually led in 2008, but has lagged since.  In fact, one could say the SSEC's "bull market" only lasted a few months (can anyone say "no QE2 in China"?); it has not made a new high since summer of 2010:

Regarding the short-term picture, I cannot overstate the importance of having intra-day data.  Okay, that's not completely true -- I could easily overstate the importance of this.  For example, I could say, "A lack of intra-day data is the leading cause of slow and painful death in North America."  That would be a definite overstatement.  But, as far as the counts go anyway, it's pretty important data.

So I have fumbled around with the charts as they are, and have two to present.  The first shows the current move down as part of a nested 1-2 series.  Both first waves are complete, however, I have literally no clue on whether the current wave ii is complete, nearly complete, or something else entirely.  That's where I really need intra-day data.  Also, I can't reconcile the rest of the count without it.  Also, it's the leading cause of slow and painful death in North America, as shown in this chart:

The second short-term chart is an ugly way to count the entire leg down as one wave.  I don't like this count as much, because it doesn't really balance very well.  In fact, when I look at the count this way, I am again inclined to think it counts better as an A-B-C. 

The problem is, if the larger count is correct -- and there's no reason to think it's not, it's a pretty good triangle -- then the current wave down should be part of red wave C.  And C-waves are never A-B-C's; they are always 5 wave moves.

But almost anything is possible, since I have no intra-day data.  Anyway, here's the other ST chart.  As we can see on this chart, I forgot to save the chart I was working on, so I have to go re-do the whole thing.  I realized this after systematically uploading four charts to this article, which were all wrong (not shown). 

(30 minutes later...)

Luckily for you, I'm only going to show the correct one I just recreated (below) and spare you the agony of my personal hell:

I have seen some people try to count the whole wave as a leading diagonal. This doesn't really work, since leading diagonals, unlike ending diagonals, usually break up into 5-3-5-3-5 moves. Allegedly, they can also break up into 5-3-5, although the reference materials offer no further detail than that (in this regard, the literature is a bit like a cookbook which says, "You need to bake this for 5 hours. Or 3 hours, whatever." with no additional instruction). I suppose you could count this as a 5-3-5 fairly well, with an ending diagonal inside the leading diagonal, and a partridge in a pear tree.

So that's what I've got.  Again, without ST data, it's a bit like throwing darts at an effigy of a politician while blind-folded... without the tell-tale "OW!" you'd get from the real thing, there's just no way to know for sure if you've hit it or not.

The original article, and many more, can be found at http://PretzelCharts.blogspot.com

(Quick) Crude Oil Update: Top in Sight?

NOTE:  Friday's regular stock market update is posted just below.

I was just expanding my crude oil charting, and it looks as though crude may be within a couple dollars of the Wave C of (ii) top.  This is, of course, assuming my preferred count is correct.  If my count is correct, crude may be putting in a significant top either today or Monday.  If it exceeds the $100.62 mark, my ST count is off.  My confidence in this count is reasonably high.

60-minute chart below.  I didn't label the smaller wave forms, because it's very time consuming in Photoshop, but everything reconciles properly:

The big picture chart is posted below.  Under my preferred count, crude is in the process of completing wave c of (ii), and will soon reverse hard from these levels.  The long-term target is $25 +/-.

The original article, and many more, can be found at http://PretzelCharts.blogspot.com

SPX Update: Crash Wave Ready; Confirmation Still Pending

There's been no material change in the counts since yesterday's update, however, I have narrowed down some possibilities for the current retracement rally.

(If you're new to the discussion, or to Elliott Wave Theory, it would be quite helpful to familiarize yourself with The Big Picture long-term market projections, which have played out quite well so far.)

The retracement rally off the 1226 print low has fulfilled the minimum requirements for a second wave.  While there are several options for the structure to take from here, two possibilities jump out at me as the most likely:

1) We have seen most, or all, of the Wave 2 rally.

2) Thursday was part of an a-wave leading diagonal (see chart, below).

I am slightly favoring the leading diagonal interpretation, simply because it counts a little better given what the market has revealed so far.  However the rally could also be counted as a series of zigzags, which makes for an unpredictable short-term outcome.  It reminds me a lot of the beginning of the rally off the November 1 lows; it's simply an ugly structure.  So the third option is that it will evolve into a similar type of rally as the previous one -- although, this being a smaller degree wave, it won't retrace as many points.

The critical knockout level for my preferred count remains the October 27 high of 1292. 

I continue to feel that the important support levels are 1215 and 1190 SPX.  If the bulls can't hold those levels, we will almost certainly see a rapid drop to the next meaningful support zone near the SPX 1000-1050 area.  This first leg down would then set up a much larger crash wave, which could ultimately take the SPX as low as the 400's.  The chart below reveals the intermediate picture, if these critical support levels don't hold:

The bullish alternate counts are still floating around out there at 20% odds.  However, given all the bullish sentiment; the fundamental mess the world is in; the double-failure at the 200 day moving average and head and shoulders neckline; and the cross-market comparisons I've been publishing for a couple weeks (the Dollar, copper, Apple, etc. -- Apple and the Dollar, incidentally, are so far performing exactly as projected.), I continue to have a difficult time viewing this as anything other than an important top.

As a result of all these studies, I believe it's highly likely this crash wave will occur, and am favoring it at 80% odds.  But it's not like I've never been wrong before (just ask my wife, she'll gladly verify this).

In any case, it's a bit of watch and wait right now.  The market is perched on the edge of a cliff, and what happens next could determine this market's future for a long time to come.  Trade safe.

The original article, and many more, can be found at http://PretzelCharts.blogspot.com