Up In The Air

Reading blogs and financial new sites this week, I see that the number of opinions on the markets next direction have multiplied over the last week. After today's action many are convinced that a correction has begun, but interestingly enough, the pattern of today's decline, while sharp, did not look particularly impulsive. In fact, it looks to be a 3 wave movement. Frankly, I have just about lost patience with this top that never seems to materialize while the markets are essentially marking time.

Since the Qs did not come under the 45.53 level, it appears that they could still advance from this level next week. If the 45.53 level is broken, the 50dema of the Qs is now at 44.71, which is right at the December high of 44.73. This should be the first level of defense should the decline continue. If they get far, we should be able to use a bounce off the 50dema to go short assuming we see a clear impulsive pattern from the high, but that is a big if at the moment. We can count a larger 3 wave movement with a measured move target of 45.42 from the January high from which the rally could continue as well. This is why I am so reluctant to get short right here.

Back in December, things seemed so clear. The Qs were finishing up wave (5) and I was short. But then the breakout at the end of December terminated that plan.

Now, what we know is the pattern 11/16 to 12/17 was a triangle, and triangles always precede the last motive sequence of a pattern. If the 1/11 top completed this motive wave, then the high of 1/11 must not be exceeded. If it is, then the higher targets are in play as wave (5) moves higher in wave 3, 4, and 5 of (5). While coming under 45.53 is a clue that the Qs may have topped, we really can't be sure until they come under 43.76, the wave E low of wave (4), or we see a clear impulsive move off the of the top. To date, we haven't seen either of these things, and so it just doesn't make sense to get short again. It also doesn't make sense to jump ship on long positions that are working either.

In my opinion, the best thing to do right now is to sit tight. Hold onto to positions that are working. Do not add new longs, unless we see another breakout, and wait to go short when we have a clear setup.

I'm not sure if this post was clear, or clear as mud. I've been working on business tax prep all day, and my brain is in a fog. I'll to put it on a chart this weekend.