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October 22, 2008

Low Five

Every once in a while I make a statement on this blog that shocks a good portion of the readers. This post should prove to be one of those instances. Today's action certainly did not skimp on excitement. The S&P 500 moved lower along its projected path to the lower triangle boundary. It was almost as if the projection lines I drew in recent days were grooves from which price could not escape! Then something changed. Instead of bouncing higher for a last hooray before our anticipated plunge, price continued lower and burst through the lower boundary by nearly 3%. At one point the SPX was down nearly 9%... another mini-crash within a sea of mini-crashes. A late-day rally then ensued and brought price back to finish where it could confuse the most number of people: right on the triangle boundary.

Now for the potentially shocking statement. {Drum roll, please}. Contrary to what may seem like an intuitive conclusion, the fact that price went straight through the lower triangle bound rather than putting in a last-gasp rally actually shifted the odds toward bullish resolution! Wave 5-of-3 defintely began today as testified by the triangle violation. The big question is whether wave 5 also ended today. I think there is a small chance we will still test the extreme low of October 10, but for the most part, I will be intently hunting for confirmation that big Wave 4 of the bear market has commenced. I believe this major countertrend wave will take us to somwhere within the range of SPX 1100-1250.

Precious metals also continued their pernicious decline, and gold handily took out the September low, as anticipated. I am a little disappointed that I only caught about $80 of the drop from $900 on the short side, but that's the cost of an antsy disposition. In any case, I suspect we will presently witness a correction in the dollar which should give at least a short-term boost to the PMs. I may play this via a long miners position since I suspect that a stock market rally will give them an extra kick.

My apologies for the lack of charts this evening. I have several places to be and already have one foot out the door as I click on Post Entry. Good evening....


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