Oct 3, 2014


Let us recap:
- EW - W-X-Y or impulse.... we should be in 3 of 3 the strongest wave and instead closing around the bottom we have strong intraday reversal. The impulse is very doubtful.
- Cycles - at day 39.... and we have bullish intraday reversal close to a 40 day cycle bottom.
- Technicals - looking bad at the moment no sign for a reversal
- Market breadth indicator - divergences and at oversold levels McClellan Oscillator/advance-decline, VIX reversal
- Bullish reversal candle
- TomDemark buy setup finished
- DAX three legs lower with the same size - looks like triple zigzag

So I do not know if I am biased but my feeling says this is a bottom.... with corrective move lower. Two options - this is either wave 2 of ED or part one of a much bigger correction.
Even if we have a bottom the technicals look bad and the indexes moved much lower than expected - look at a weekly chart. Taking this into account the main scenario is lower high and this is the first leg of a bigger correction. If next week is very strong and wipes out completely the loses from this week than we will think about 2 of ED and higher high.

How to trade - it is prudent to wait for a higher low... bottom/top fishing is never a good idea. If the next move lower can not take out the low I am long. Given the strength lower I think we will have a chance for a decent entry.


  1. Carnap:
    "The impulse is very doubtful." Probably yes for SPX.
    "DAX three legs lower with the same size - looks like triple zigzag". Probably not. A DZZ or an impulse. http://www11.pic-upload.de/03.10.14/zxwq5ny6929.png
    "this is either wave 2 of ED or part one of a much bigger correction". Because I follow strict rules for EDT pattern EDT could be excluded since a retracement of >61,8% of wave 1 of EDT is not allowed.
    Since signs are restricted here I will give more detail on my blog

  2. I do not follow EW so strictly the main point is I think this move is corrective. Too deep for me too, so probably we would see lower high but I will keep an eye on ED especially if the next week we see retracement of all the loses from this week.

  3. Carnap:
    Yes, I agree with you.