9/29/11

So, the market started the day by gapping up, then tanked, then rallied, closing up 10 points.  Hope you weren't long Netflix, as if you were, you got burned again - the last time NFLX saw the price it closed at today was early August of last year.  AAPL, GOOG, or CMG - the dividend-less bellwethers - were all down today, presenting a rather worrying non-confirmation with the SPX which was up.

A bit of a noisy chart today.  On the 10-minute, we have a lower low on higher RSI so the late-day rally made perfect sense; if the shown wave count is accurate, it might be a larger rally to close out the month.  I bought SMN in the early going for an intraday scalp, which succeeded but didn't give me as much profit as I was hoping for (I set my protective stop above the day's interim low). 

On the other hand, that "Submin v" really looks like 3 down - the subsequent wave is a drastic correction with overlap, but could in fact be a 4th wave of an ending diagonal (the turquoise lines show this).  In addition to this, we have the more bearish "1-2-1-2-1-2" count.  In part because (1) the larger trend is still down (remember, no new low on 30- and 60-minute higher RSI yet) and (2) there are superbear counts for this move that have not yet been invalidated, and (3) the end-of-quarter window dressing has been more analogous to a brick being thrown through a window, I opened a partial position in SH (single-short SPX).

The upper green line is from the 1195 top to what I call Submin iv (it could, however, be a 2nd wave in a 1-2-1-2).  It represents the top of this downward channel.  The bottom of the channel is unclear, which is why I have drawn two potential lines.  Note the slope of the channel, however - it loses about 15 SPX points a day, quite steep.

In terms of resistance levels, we are already just about at 38.2% retracement from the low, which lends further credence to a possible downswing.  1167 would be the 50% and 1174 the 61.8%.  The 78.6% retracement is 1183.67, which the black line (trendline down from the 1230 high to the 1195 high) crosses through tomorrow.  The cup and handle is still a possibility, but it is quite possible that the up move will simply be the wave (ii) retrace (analogous to the large C&H that took up much of June).