At the suggestion of a reader, Jack, let's take a step or two back and look at the bigger picture in hope of gaining some perspective on market direction.
First a big picture snapshot going all the way back to the mid-1990's which is about when the roller coaster started picking up speed and the adventure began:
Your first impression? Right, "Double Top". Prechter calls the this pattern as a Wave 5 Top in 2000, followed by an A wave down into 2002 and then a B wave up into 2007. That's leaves us in a C wave down and Prechter's targets are much, much lower then the 1990's lows at the far left of the chart.
This C wave should take the form of Five Waves Down from the B top in 2007. Here is my chart on that five wave progression, it's the Weekly SPX chart with linear regression channels drawn on the entire move down from late 2007:
The issue we will be wrestling with over the next few weeks or months is whether or not Wave 3 down is complete (A completed five waves down from Wave 2 high) or if there is still another low coming to complete that cycle.
For the past six months, it was pretty clear that Wave 3 was unfolding on this Weekly chart, ergo my steadfast bearishness. That clarity has recently become muddled in the potential that the entire Third Wave may be complete. The implications of that possibility can be seen on the above chart as the projected targets for Wave 4, 850-1000 on the SPX.
A few weeks ago Prechter went from Short to Cash in the expectation that this massive decline would soon take a respite, one that would last for months and several hundred SPX points higher and one that he felt most comfortable sitting out. His short netted him 800 S&P points. Being conservative and possibly leaving some on the table was more of a strategic decision, not so much a market timing forecast.
Those of us that do not sell advice but must trade in the trenches every day have another decision to make. Trade on the Long or Short side of this market? Ever since this post on September 10, 2008, that question has been easily answered on the Short side of the market. What has changed isn't so much the direction of the market, but the clarity on that direction.
For that, I have been posting shorter-term charts, utilizing proprietary analysis tools, some store-bought, some internally developed and all taking some element of subjectivity into consideration for day to day and even hour to hour trading.
But as Jack suggested, keeping an eye on the big picture, from where we have come to find ourselves at this time and at this place in the overall price patterns measured in years and not minutes, gives a perspective that can only be gleaned by stepping back, taking a breath and having that, "ah-ha" moment.
Back to the shorter-term, next time.
Another Big Picture ah-ha moment: