Here is an updated Weekly chart of the SPX, through Thursday's close:
There are two wedges drawn on the chart. The first wedge was broken to the downside three weeks ago. That break led to a drop of close to 100 points on the SPX. Prices have been flirting with the second wedge this week, just barely touching the bottom trend line Wednesday and bouncing weakly off of it Thursday. Meanwhile, the False Bar Stochastic oscillator is signaling that down-trend is in place.
The significance here is that a break of the wedge to the downside should lead to another fast 100+ point decline. It can happen at any time, tomorrow, next Monday, a week from next Monday. Until it happens, prices can play all they want inside the wedge. Frustrating if you are short, but as we saw three weeks ago, patience now will be well rewarded upon the break.
Question of the Day
Since I discovered your blog almost a year ago, I have been awestruck by your accuracy and refreshed by your candor. I also know that you would be the first to say that if you were right only half of the time that you would still be ahead. That said, is it possible that the EW model has no way of factoring-in the extreme differences in today's scenario? Is it possible for the herd to behave in an unpredictable manner this time? Wondering minds and all that...
Where I suppose it is possible, it is not very likely. More probable is that I screwed up the application of theory to facts, thus arrived at an incorrect conclusion. That said, even that is not very probable since the two eminent EW authorities, Glenn Neely and Robert Prechter are in agreement with me that we are going lower, a lot lower.