From Brian
I was looking at the options for the SPX over the next few months this afternoon, and Mish is right – March is a mess. April and May are feathers in the wind, but March and June are very heavy. The SPX seems to have clusters around 850 and 750 on the put side:
finance.yahoo.com^SPX&d=o&q=A
Given last week's performance, I'd have to say EW and Max pain are at odds here. There are counts that have the SPX making a new low beyond 806 and then rallying in a correction from the December 2 high of 954 – which could take the S&P right back up to the 850 area for March expiration. That count is the Green one on this chart:
tinyurl.com
That would leave wave 2 from the December 2 high complete with waves 3-5 to go during April and May. That is also the time where the 40 and 80-week cycles bottom:
tinyurl.com
But the Green count is not the one that counts the best right now. I think the best count right now is the Red one, which is similar to what Zoran Gayer had this weekend.
safehaven.com
The red count has the S&P just completing a wave 2 Flat last week, from which wave 3 should be starting right now. If I did not read this board and knew nothing about Max Pain, this is the count I would be betting on. But after seeing the S&P reach pain at 900 in January, and then seeing last week, Mish has me a little skeptical of the best fitting EW counts right now that call for a wave 3 dumping beginning right now.
The short term count was not complicated by the rise this afternoon. The S&P ended at the 61.8% retracement from Friday's high at 952. So far this could be a normal correction of the recent decline (Grey and Black count), or it could be the beginning of another A-B-C rally (Red wave X) that would probably take the S&P up to around 864:
tinyurl.com
The Decline from 852 and the rise today can be counted a number of ways right now, but looks most like a 5 down and a 3 up – which means the trend is down. When this correction up finishes there will be a move down, and that move down will tell the story – a 3 wave move down means we're heading up.
That is really all that can be said in terms of EW right now. Using EW to see the true short-term potential of the market can be complicated, but throw in some MM's and it is really hard to have confidence in one's “best count” playing out.
The P&F chart will turn with a move above 840:
tinyurl.com
The Transports managed to close above its October low - barely:
tinyurl.com
And the dollar looks like its in a Flat correction, which would alternate with the Grey wave 2 correction. That means the dollar likely has a Grey wave 5 down directly ahead:
tinyurl.com
stockcharts.com
The BP chart, the Summation and the other technical charts on the Chart list all suggest this wave 3 is coming – yet Max Pain has me edgy. Did you all listen to Financial Sense's interview of Dr. Marc Faber? Good stuff.
netcastdaily.com
netcastdaily.com
Hope nobody minds the long rant. I was stopped out of HOV today - Grrrr. A curse on those housing stocks.
tinyurl.com
All the Best,
Brian |
