Dow has almost overlapped last Wednesday's low (SPX 2080-->2036). If Dow jumps more than 30 points tomorrow morning but less than 150 points, we could see overlap in Dow (and perhaps even SPX) to confuse traders while not seeing overlap in many other major indices including NYSE, Wilshire 5000, Global DOW, NYSE and Nasdaq. Regardless, a lack of overlap would make last Friday's breakdown in all of those markets look like the heart of a wave 3 preceded by a series of nested 1-2 waves and presumably to be followed by a series of nested 4-5 waves.
In addition, in all of the above markets, the rally into December 2nd (SPX 2104) could be counted as a 5-wave structure thus likely making it a failed bullish structure truncated before making a new high. Russell 2000 made a new short-term high but way below the May high. That also takes away the bulls' argument that the current downtrend is part of a larger ABC correction destined for a rally to all-time highs, because the prior drop 's 3-wave structure (SPX 2116-->2019 as an example) is followed by a final 5-wave truncated rally meaning the current downtrend EW count should be started from early December, not November. To add salt to the bearish wound, SPX, Wilshire and NYSE look like they completed possible EDTs to conclude those truncated rallies into December 2nd while GDOW has a clean 5 waves ending December 2nd. And, even worse, Nasdaq looks like it completed a much larger EDT from August that also fell just shy of its May high in truncated fashion.
This price setup seems VERY VERY bearish across major markets. Drilling down in SPX, we have lower highs in 2116, 2104, 2094, 2080 and 2068 along with lower lows in 2042, 2037 and 1993 which is below the previous major 2019 low. Also very bearish. If the setup I mentioned in the first paragraph occurs with overlap in some markets but not others, I think that will keep enough bulls on the boat for it to continue sinking. It also means we could see the first clear set of 5 waves lower since October/November 2007 and it means my initial 1950ish target should be reached with potential for 1900ish.
I'm not sure where the market will be when the Fed makes its announcement, but bulls need to see price overlap created in most or all of the above markets to at least temporarily stem the bearish tide. That might require SPX 2045-2055. Of course, I've got to work hard to keep my emotions and CY2016 bearish bias in check knowing trends can occur in nearly endless ways. But, even looking at price and technicals using basic TA setups like LLs, LHs, EDTs, H&S, swing candles, bearish candles etc, the picture has high odds to be very bearish and when combined with my various long-term analyses, spending indicator for a Nov1-Dec1 +/- top and a likely rate hike, a powder keg is at risk. If SPX can climb back above 2050, I'd think it's going to be pinned at 2050-2070 near Friday OPEX so I'd re-evaluate and possibly exit shorts if my S2 System turns bullish, but I must say that is not what I am expecting. Many indices have spoken. It's possible we get the Santa rally starting at some point next week but also very possible it starts at SPX 1900 or 1950 after a 5-wave downtrend completes. That would also fit the all-year CY2007 analogy I've been presenting. Good fortune.
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