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Stock Market Decline Below Wave (iv) Low

Stock-Markets / Stock Markets 2014 Sep 24, 2014 - 01:56 PM GMT

By: Anthony_Cherniawski

Stock-Markets

I may have received my morning wish after all. In the after-hours, SPX continued to decline another 5.30 points to 1977.47 before starting a bounce. Micro Wave v appeared complete at 1983.80, so the additional decline after hours was a corrective Wave b, although it is undetectable in this chart. That leave a Micro wave c left to go back to 1997.03 in the morning. This puts SPX back on the Cycle schedule for its Pivot day tomorrow.


This is what I would call the “normal” view. Let’s look at an alternate view on a finer scale.

On a 10-minute scale, another probable scenario emerges. There is a very small Micro Wave v ending at 1991.01. I had originally thought it might be Wave one of v. Instead, it was the whole kahuna. This was followed by a running Wave (ii).

A running correction is one with the tops of both waves a and c being lower than the previous waves. A running correction is serious, since it implies profound weakness.

In addition, Micro wave ii of sub-Minute (iii) tested the lower trendline of the Orthodox Broadening top and it finally held as resistance.

Finally, Tomorrow is day 232.2, a Pivot day. It is possible that the Yellen/Ali baba rally compressed the Cycle that should already have been in (a panic) decline even more, causing it to play “catch-up.” If so, this afternoon’s pivot on the Broadening Top may qualify and there could be a huge gap down tomorrow beneath the 50-day Moving Average. This may be the start of a Flash Crash that I have been warning about.

This could lead to market closures which, in turn, may incite an even greater panic. Fortunately, Day 236.50 next appears on Monday (mid-day, of course). This will also give the authorities the wherewithal to stop the decline over the weekend. If this occurs, I expect to see a barn burner rally take the market back up as much as possible for the quarter end. The minimum (Minor Wave 1) Flash Crash should have a target beneath 1737.92, its February 4 low. An Intermediate Wave (1) low may be beneath 1560.33, the June 24, 2013 low. These are some pretty serious numbers, so be prepared.

If the above scenario is correct, VIX may already be underway in Minor Wave 3 with the Head & Shoulders target as its goal. This leaves Primary Wave [1] having a minimum target of 23.26, which puts it above the declining Primary Wave [4] top of 21.48 which occurred on February 3, 2014.

If short selling is banned, this may leave the VIX ETFs as the only tool to battle the declining market.

We’ll know in the morning how much of this is fantasy or fact. I will be out for a breakfast appointment early tomorrow and may not arrive back at the office until after the open.

Tony

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As a State Registered Investment Advisor, The Practical Investor (TPI) manages private client investment portfolios using a proprietary investment strategy created by Chief Investment Officer Tony Cherniawski. Throughout 2000-01, when many investors felt the pain of double digit market losses, TPI successfully navigated the choppy investment waters, creating a profit for our private investment clients. With a focus on preserving assets and capitalizing on opportunities, TPI clients benefited greatly from the TPI strategies, allowing them to stay on track with their life goals

Disclaimer: The content in this article is written for educational and informational purposes only.  There is no offer or recommendation to buy or sell any security and no information contained here should be interpreted or construed as investment advice. Do you own due diligence as the information in this article is the opinion of Anthony M. Cherniawski and subject to change without notice.

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