Tuesday, April 9, 2013

04/09/13: short SPX, ST target 1555. B wave possibly ended

Markets achieved another new high of 1573.89, +0.23 points versus the previous high set on April 2, and giving the bears yet the middle finger again.

I thought we would likely end short of the new high since I currently have this rally as the "B" wave of wave 4 of higher degree, but now we have inched slightly higher.  If we are currently still in wave 4 and this is the B wave, then we have ourselves an irregular B wave in an expanded flat structure.

It remains possible for this to be the irregular B wave.  Wave 2 in my book was the correction after the November election.  It was a simple zigzag pattern.  If we apply alternation, then I would expect wave 4 to be a more complex structure.  The expanded flat fits the bill.

Another reason why I am still convinced this is a B wave is the magnitude and speed of the rise.  B waves tend to move swift and reach overbought (or oversold) in a hurry (i.e. this one 2 days).  Time will ultimately tell but if this is an irregular B wave, then I am expecting the C wave to be fast and furious, down to 1480-1500 and exceed our A wave low of 1539.

One of my least favorite positions to take is a short-counter trend position.  Today was no exception.  It is always tough holding a short position through a fast B wave, but the payoff could be rewarding once the C wave is under way.

Even though I think we are looking at 1500 and lower, there is a web of support at 1555, so I will take it one step at a time.


CCIs are getting overbought with the 8 and 13 showing negative divergence.
DI+ is at the top of its channel.
Today's final hour slam is a +1 for bears but it will need some more effort tomorrow.
OBV is sky high.  I think the B wave has run out of juice so given how high OBV is, I am even more convinced that after this correction, we will see 1600+.  That is possibly a May-June event.

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