Russell,
From the couple day wedge top that culminated in a downside break on Tuesday, Initial downside targets i picked up pointed to the 1166 area on the Dec. S&P. Of course, that was fulfilled today. If we go lower from here, and clear that 1166 area, this pattern nearly always results in a DOUBLE of the intial move. The initial targeted move was from 1196 to 1166, or 30 S&P points.
In this case, we have the caveat of crucial support in the 1150SPX area. If we're still in an up impulse as THE HIT MAN suggests, then this area (1150) should hold, and we won't see 1136 this go round.
However, if we have begun the genuine down move from Tuesday's peak, then we should break 1150 decisively, visit 1136, then spend the subsequent few days in a retracement wave 2 rally that could carry us back up to no higher than the peak we just made (100% retracement). According to EWT, the most likely retracement for any wave 2 is 50%, with the next most likely 61.8%. The minimum retracement requirement is 20% to qualify as a legitimate wave 2.
So until 1136 is cleared during a subsequent down move, I wouldn't say we're in the BK just yet. But we could certainly label this action as "THE PRELUDE TO THE BK", and any rallies as further opportunity to lighten longs or hedge appropriately.
Regards,
David |
