Wednesday, December 3, 2008

End of Day 12/3

Wild ride of a day… which I did not play, until after the close!

The DOW finished up 172 points, the S&P went for a 2.6% trot, while the NDX led the advance 3.2%, with the RUT gaining 2.7%.

We opened with a dump, jumped 300 points into positive territory, dumped 270 points again, and then performed a near perfect 3 wave advance gaining over 300 points into the close. I was busy writing most of the day and didn’t play along until the close.

I’m playing with a small position because I can see it both ways. However, here’s why I took a position at the close:

1. This looks like a potential bear flag. If it is, the target will be in the 760 region which is a huge move from 870. Look at the wave structure here… that looks an awful lot like a 5 wave structure off the 817 low, and wave 5 looks like it just ended with a perfectly symmetrical 3 wave structure. Check out the math… 835 to 861 = 26 points. Add 26 to 847.5 and you should land in the 873.5 area… and the high of the day just prior to the close? 873.12! Doesn’t get any closer than that. AND look at the structure of each of the up legs… all a-b-c’s. Then again, we could be looking at a potential bullish triangle...

2. Both the DOW and SPX produced pretty clean looking hammers, potential reversal indicators. The Dow had slightly lower volume than yesterday, but the DIA and SPY were higher volume on the advance, so that’s a mixed bag.

3. The bond market isn’t saying rally, it’s saying deflationary credit collapse/depression. The TNX was down again, and the IRX is still looking mortally wounded.

4. Like I explained in my article on waves earlier today, I see that the 60, 30, 10, and 5 minute stochastic ALL finished in or near the overbought area. Love that.

Now, I do see bullish potential: On a daily chart the advance from November 21st looks pretty much like it could be an A-B-C and we still could be making a triangle.

We still have a fresh BUY on the weekly stochs and it contrasts with the daily, so any trade I do here will be fairly short term and small.

We’ll see what tomorrow brings, should be fun.

Have a good evening,