Keene Little : 7/29/2007 10:51:22 PM
Monday's pivot tables: Link
Because of the big move in the futures after the cash close on Friday there may be some confusion as to what number to take for the closing price. I'm getting mine off the daily chart from QCharts and confirming them with Interactive Broker's numbers.
So is the selling done? We're certainly oversold but that doesn't necessarily mean anything. As always I see a couple of different possibilities which I'll review.
First thing to notice on the DOW 30-min chart, regardless of the wave count, is the descending wedge pattern over the past day with the bullish divergence to go with it. This is getting ready to pop back up but the question is how far? Link
The dark red wave count calls the end-of-day drop to a new low as the end of the move down from the July 19 high. It would be counted as a quick succession of 4th and 5th waves after the steep 3rd of a 3rd wave down to Thursday's low. This wave count calls for a rally early this week to correct the decline. It would set up an outstanding shorting opportunity later in the week, but a great long play until then. If it rallies like this then you'll hear everyone shouting what a great buying opportunity it is. Listen to them at your own peril (scalp long trade only until we know for sure).
The light red wave count calls the descending wedge as the 5th of the 3rd wave which needs another up-down sequence to finish it. Then another consolidation in wave-4 to be followed by a final low perhaps to around 13100 by mid week. This would then be followed by the big bounce correction of the decline.
The bullish divergence says shorts are the ones at risk now. A break of the top of the wedge, currently just under 13400 (so a big rally just to get there), as per the dark red wave count, would be the signal that the decline is finished. Otherwise look for the market to continue to struggle for a few more days before a rally can get some footing.
SPX looks very similar--30-min: Link
The top of its potential descending wedge in near 1478, nearly 18 points above Friday's close. We'll need to see a break of that level to confirm the bottom is in for now. Looking at the daily chart shows the potential to drop to about 1448 before finding better support at its 200-dma and uptrend line from July 2006: Link
If the sellers aren't nearly done yet then the weekly chart shows some scary downside potential: Link
The uptred line from October 2002 is near the March low (which the banks have already broken) of 1364. There is a way to count the move down from the high as just the start of a serious decline to come but I don't consider that the most probable wave count. But keep it in mind if the selling becomes relentless again. In the meantime the dark red wave count matches the one on the daily chart.
NDX remains the most bullish by not breaking its uptrend line from March, nor has it broken below 1948 thereby keeping the green bullish wave count alive. The Nasdaq doesn't support this and I see some of the tech big caps looking like they're putting in a top so I'm definitely leaning towards the dark red bearish count--bounce and then tip back over and break support. Link
The weakest of them all, the RUT, gives me the impression that it will consolidate for a bit and then drop to a new low before giving us a bigger bounce: Link