There’s been no material change in the counts since yesterday. The primary occurrence of note on Thursday was the SPX reached the 1254.50 target.
If this is a corrective second wave, as the bearish count sees it, then a top is forming. Currently, the move off the December lows is a three-wave form, meaning it has not yet completed an impulsive pattern and could very well fit the bill. Regarding the short-term counts shown on the chart below: the bear count needs to stay below 1267.06 on the S&P 500 (SPX) to remain valid. The bull count needs to stay above 1229.51. That pretty much sums up the situation, and the key levels to watch now.
There are two other charts of interest to share. The first is the NYSE Composite Index (NYA), which is a much larger index than the SPX, and therefore more representative of the broad market. I mentioned a potential triangle in the NYA on December 18, and suggested that the lower boundary would be tested. That boundary has been tested, and the NYA has now nearly hit the upper boundary of the triangle. A breakout/breakdown from the triangle suggests a move of about 20% in the direction of the break. As the larger Elliott counts suggest that the market has not yet bottomed, I would expect if the market did make an upside breakout, it would ultimately whipsaw.
The red line is another overhead resistance level for the market to contend with, if the upper triangle boundary is broken.
Next is Wilshire 5000 chart I first published on December 4. It continues to track well, so it’s worth updating at this point. (Thanks to Arnie for reminding me to update it.) 🙂
The last trading day before Christmas is generally a light volume holiday session, which typically favors the bulls, since the large funds realize they can’t do too much selling into light volume without cracking the market. The same was true of the Thanksgiving holiday, though, so light volume doesn’t automatically guarantee higher prices.
In any case, since it’s my favorite time of year, here’s a little Christmas poem to close out the holiday week:
Everyone was still hoping Europe didn’t get out of hand.
The loans had been readied by the old ECB,
and nations lined up to get money for free.
The bulls were all nestled, all smug in their beds,
while visions of QE3 danced in their heads.
With ma in her kerchief and I in my cap,
we’d had about all we could take of this crap.
Then on CNBC there arose such a clatter,
I sprang from the couch to see what was the matter,
Ben Benanke was talking, he was building more bubbles!
He just didn’t care about any debt troubles.
He said he could print; that the Fed had more tools,
He said, “We’re not breaking, just bending the rules.”
“When there’s crisis,” he said, “The Fed is your man.”
“No it’s not,” I replied, “You’re just kicking the can!”
But he couldn’t hear me, there on the TV,
Even so, I still added, “Ain’t nothing for free.”
When what to my wondering eyes should appear,
But the eight-hundredth bailout we’ve seen in four years,
Ben sprang to his press, to his team gave a whistle,
And the money flew out like the down of a thistle.
Then I heard him exclaim, as oil started to spike,
“Merry Christmas to all! And to all a good night!”