What a Week! The S&P seems to have finished the Ending Diagonal that I have been watching for the last 2 months.
On our April 22nd update titled "Is it time to wake up the Bear," I said:
"I have been bullish for a very long time, and even though I think we have a little more work to be done on the Ending Diagonal, it isn't time to be cute. If I could have my way with the market, I would want to see another high into the 1319-1338 area with stronger targets at 1320-1327. As you can see, IF the market doesn't make me wrong after following this setup for a long time, we don't have much room to play around with.
Perfection would be a high into May 10th to 12th with some sideways action in the upcoming week before a final blast to new highs."
We got exactly that! After being bullish for a few years, it sure is nice to see the market play out perfectly to my first call of a market Top. And with the help of our Gann guy, we narrowed it down to 3 days and it fell right in the middle of them.
I did come up with an alternate on Sunday that would allow for still another push higher after going down into 1300ish support. That setup is still possible in my work but odds aren't good anymore. It went from a 50/50% chance to about a 5% chance now. The main reason I don't like it anymore is the impulsiveness of this down leg. Since I have seen stranger things happen, it will be left as the alternate till it breaks the converging trend lines. Wouldn't you know that we closed on that line Friday!
I think we have reached support for this leg down and should see some kind of retrace back up. Taking off any shorts on that retrace would be smart just in case this alternate would actually kick in. We will be watching what the Dow is doing as that is also a reason I adapted the alternate. It just seems that it wants to take out its old highs. We will know that the top is in and there are no other alternates once we see prices break the 1280ish area. As you can see, the price level to wait for isn't so far off If we do start to sell off, with or without a bounce first, targets so far are in the 1173 area by around Mid August. Calling for anything else now would be nothing but guessing. Targets get adjusted as we approach certain areas and depending what the wave structure looks as we get there. So, no crash calls from me. Any outside events that may happen on this decline would also accelerate it in price and time. You would think that if the 4 year cycle is kicking in, that our stated target will only be a resting place.
As for next week, we should find support at Fridays low or a bit lower and then rally a bit in a choppy fashion. 1311 +/- 5 points looks Ok for it to turn lower if indeed we start a third wave lower.
Here is a chart of the OEX I showed on the last update showing how it went into our projected time and price target and sold off violently
The Russell 2000 also went to our target area and sold off. Even if one or several other markets attempt to challenge their highs, I don't expect the Russell to make a new high.
Below is the Dow Jones Composite that I showed back in February which seemed as if it would struggle to get to its Fibonacci targets. It sure did reach them with an overthrow and closed right on them Friday.
Once again, we did get what we were looking for but we need to break the next 10 points or so lower to confirm. When I see the Dow so close to a level it wants reach, I want confirmation of a top and removal of all alternate patterns. Once we do get that confirmation, charts would be updated in real-time at www.Tradingthecharts.com Forum. Once that support breaks, there are many points on the short side to be made.
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