Wave d Follow-Up

Intel's negative report afterhours increases the likelyhood that the 11/24 lows will be taken out tomorrow. However, we should not become complacent and expect that an immediate downside follow-through will ensue. There are clearly a number of ways that we can get to the bottom of wave 5, but take care not to be overly aggressive as it is possible that merely a retest of the 10/10 and 10/24 lows is all that will happen.

I've spent a lot of time discussing the potential elliott wave patterns because it is a subject that interests me, and it can help keep us on the right side of the trend, but I want to make it clear that I am not trading the pattern specifically. The fact is that there has been no clear change in the weekly trend since the beginning of September. All I have been doing is selling the rallies and buying the lows while this consolidation plays out. If we get a test of the 10/10 low in the Dow, I would first expect a rally simply because the first test of lows and highs typically fails and also because so many people believe we have seen the worst there will be some buying at those lows. When they fail on the second test is the most likely point of acceleration. For now, I am still waiting for a rally to add to short positions. I will not short the breakdown tomorrow.

Tomorrow before the open would also be a likely opportunity for a surprise positive news event, possibly intended to avert the breakdown. Whether it is working or not, we have seen some sort of government news every time we approach the 10/10 low.

On Comments:

I believe Laundry indicated that he would be surprised if markets held past the end of the week. I think the point here is the big picture not whether he is right about specific timing. As long as we have a good handle on the big picture, we can use other entry and exit techniques for profitable trades.