Stock Market Crash Day 7 Market Breaks Last Trendline Support

Today was a very key day in the stock market and the sp500.  Today we broke down through with conviction what I consider to be the last remaining supportive trendline of the advance since March 2009.

Not only was this line broken with a wide price spread, but was also done with volume conviction.  It was also a gap down on most indices and ETFS.  This is important because in terms of candlestick charting techniques a gap down out of a large bearish flag pattern is to be considered an ‘opening window’ in terms of price trends.

So to me today was the initiation of the next major leg down after a frustrating one month long consolidating flag pattern on most indices.

A Few Final Astro Thoughts

I have to conclude that the Astro aspects DID work, but not in the time frame and timing as was first expected.  The big astro aspect that was June 28, 2010 and also an eclipse and the initiation of the cardinal climax seems to have gapped the market down and started this new decline phase. 

I wish I had known that a month ago that this Astro aspect was supposed to be an initiation instead of a climax that price moves into. 

It is important to know that the next major Astro aspects are August 10th and 12th 2010 according to Larry Pesavento.  These two dates are so big in terms of Astro aspects that we will likely see unprecedented price move into that date or a massive geopolitical type event happen.

August 10th and 12th are only about 30 trading days away.  So we are talking about 30 full trading price bars or candlesticks before those dates occur.  Based on the way the charts are setup right now I have to conclude that these mid August dates will be a major low at this point.

Price Moves the Rest of this Week

The fact that we have a 3 day holiday weekend coming up end of this week makes the speculation about possible price moves somewhat more difficult.  Why?  The reason why is that the days before and after this weekend are typically low volume for obvious reasons.  So the question then becomes how will this market manage to get any real movement right before or right after this holiday weekend.

The fact that we broke down through trendline support and did so with a big down candle has me thinking that the most ideal scenario is for a bounce that starts tomorrow (perhaps after initial morning weakness and then a reversal candlestick hammer by end of day) and then follows through to the upside on Thursday, July 1st, 2010.

Then a bad jobs number on Friday sends the market down hard again right into the 3 day weekend.

There are many different scenarios, but generally speaking I expect a big ONE to TWO DAY bounce from either the 1040 level or slightly lower right back up to near the 1060 to 1070 level on the sp500.  Ideally this bounce will be on very light volume and will kiss the red uptrendline shown in the chart below.

First sp500 Target is 950

If you have been reading my posts here you probably have seen me write about 820 on the sp500 and even lower (780 would be the 87 crash equivalent low point) in an repeat 87 style crash scenario.  The problem is that such a huge move while gratifying to the bears just seems too hard to fathom.  It is too difficult for me to believe that such a huge fast move can occur again exactly like in 87 despite all the eerie chart pattern similarities to the 87 crash.

The 87 crash type decline had such a speed power like an unstoppable freight train.  It just seems to me that if we get a big move down to 950 Ben Bernanke and Company will start to throw a few trillion dollars at the stock market again.

I suppose the best way to strategize the coming decline is to keep two scenarios for the decline and then just let the daily tape action guide the way.  If we are in an 87 style then it should be blatantly obvious.  You will see simply a series of larger persistent candlesticks that grow in size over a series of 3 to 5 days.

The waterfall decline scenario at the moment is my preferred scenario.  It simply says that we get a series of two mini crashes.

The first would stop us very close to the 950 area on the sp500.   After hitting that low I would expect the 1030 to 1050 area to act as a magnet and see the market rally hard right back up to that range as a test of the previous resistance area.  Then the market would start to break down again into the August and September time frame eventually breaking down through 950 and much lower.

The waterfall scenario seems to be the winner at this point. 

My reasoning is that the 950 area is very strongly supported from multiple levels as you can see in the chart below.

sp50020100629

It is too hard for me to believe at this point that the market is just going to slice below the 950 and head straight for 780 or 820 in a one day 13% to 20% decline.  Anything is possible, but it just seems too unlikely.

I suppose what could happen is that you could see a huge one day drop that closes right at 950 and then the next day see a huge intraday downside move to 850 to 900.  So 950 could be penetrated on an intraday basis, but ultimately I believe price will come right back into 950 on a closing basis and rally hard back up to recent resistance levels of 1030 to 1040 before falling later in the fall time frame.

As I said earlier, August 10th to 12th is only about 30 full trading days away.  That is not that much time and so for us to get maximum leverage until that date requires that we get to 950 pretty quickly, perhaps by as soon as next week.

Posted in Index Trading, Market Timing, Online Trading, SP500
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6 comments on “Stock Market Crash Day 7 Market Breaks Last Trendline Support
  1. rippy41 says:

    thank you! I appreciate the blog and the effort.

  2. Dso says:

    Hi,

    I just found your blog. Great analysis! I will visit often from now on.

  3. Geoff says:

    In this post, you “claim” that the astro aspect DID fortell the decline of yesterday. You are chagrined that 28th-June you did not realize was the start / initiation of THE decline. Your point of view is rubbish.

    In your post of 16th June, you state

    “If the June 17 to 25th, 2010 astro aspects are to have any real credibility then this market should start to show us something dramatic sometime next week and into the 28th.”

    I do not understand how you can rationalize your post of 16th June with your post of 29th June. Get real. Astro aspects are interesting, at the very least, the mildest of curiousities.

    You do fine and very interesting work, but it is just too bad that you contaminate it with astro aspect talk. I doubt very very very much that that is your “Final Word” on astro aspect.

    Again, you do fine and very interesting work, thank you for posting

  4. shrihas says:

    Hi Tom,

    I think it is going to be Megaphone Pattern from now on. It is going to be Wave E starting from 1027 on S&P. I could be wrong but I think we are likely to touch 1150 on S&P in next about 14 trading days and then fall very hard.

    Please keep up the good work,

    Cheers,
    Shrihas

  5. Tom Tom says:

    Geoff,
    I change my opinion a lot and I do admit that a lot of times I contradict myself based on previous writings. It is just the nature of the market for me to change my opinion a lot. It can happen at any time and it is hard to stay consistent with opinions on a day to day basis. It is the nature of the beast.

    I guess we agree to disagree with respect to astro aspects and trading. The stock market is an information game and those that have slightly more information can get an extra edge as compared to others. Those who completely ignore astro aspects will be at a slight disadvantage compared to others in my opinion.

    I can almost guarantee you that the hedge funds and other big players in the market regularly use astro as one piece of their information sources for market direction. Those in the commodity futures business regularly use astro as well. Those who rely heavily on cycles are cycle models are indirectly using astro whether they realize it or not.

    Relying completely on Astro Trading and nothing else is probably a huge mistake. All I am saying is that I like to keep it as 5% of my overall information read of the markets. Nothing wrong with that at all. Plus I use my regular indicators as confirmation that the astro setups will actually work.

    It is not a holy grail and it is not perfect but it can offer very important insights into the market at specific points in time. I will continue to offer my readers important astro guideposts if I know of any that are important within the overall context of technical analysis and market timing.

  6. Tom Tom says:

    You could be right.. the only concern is that downside momentum has started to accelerate according to my indicators and so any up move to 1150 is going to require a huge amount of energy to counter this downward momentum. Maybe the Friday Jobs number will somehow surprise to the upside as unlikely as that may sound. If there is a reason why your case is correct a lot may have to do with volume. Downside volume is not at stampede levels… Downside volume really needs to start accelerating fast otherwise may be hard to get enough downside conviction.

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