Saturday, September 11, 2010

XRT Pointing The Way - Down

A large head and shoulders top is nearing completion in the XRT. There is nothing about the action in the XRT since the 7/1 low that indicates a bullish outcome - at the moment. Of course, there are other patterns that could lead to more upside in the near to intermediate term, but we should keep these possibilities on the back burner for now. For the moment, it looks as though the XRT is working to complete either a double zigzag upward correction from the 7/1 low or is in the middle of a triangle that will take another week or so to complete. Unfortunately for the bears the double zigzag is the most likely outcome barring an immediate selloff beginning Monday morning.

Anything can happen, though, and for all of the frustration (At least I know I am frustrated, and I suspect many traders are as well.) it appears that resolution is at most a week away. I suspect that we will either see an initial selloff into the Autumnal Equinox on 9/21 followed by a weak rally into early October and then more powerful selling to complete wave Y of (X) down, or we will see the rally continue to 9/21 and then the selling will begin. Reversals are quite common around the equinox and solstice dates. For two examples, the market topped this summer on June 21 and bottomed on September 21, 2001 after the events of 9/11. Either way, I will be maintaining my short bias on an intermediate term basis until there is strong evidence to the contrary. Wave W down took 47 trading days. If wave Y is equal in duration, then we can expect a market bottom between November 11 and November 29.

On this anniversary of September 11, let us pray for peace in the world.

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