SPY in the Doldrums

We're ever so close to the end. I'm being careful not to be impatient. First let's look at the SPY on the big chart:

Here we see a definite bearish outlook. Even if SPY climbs from here it is unlikely that the RSI and very unlikely that the composite RSI will show anything other than bearish divergence. I think we're going to see a "W" of some sort on the composite. Stochastics have turned over but I think they're still heading up to resistance.

Now the smaller chart:

Here we see that there's no way this is a motive wave as the current retracement has ducked below the previous peak (black horizontal lines). This implies that the previous wave was the final wave of the larger Elliott Wave. However we're clearly not in a motive wave downward. So we're in some sort of weird corrective wave. I think it's entirely possible that the market hurls itself downward to fill the gap at 130.40. However given the bullish divergence on the indicators I'm tempted to believe that the market first attempts to close the gap at 135.20.

The Nasdaq looks quite different:

Well, looks like a case of bearish divergence and maybe a completed motive wave? Stochastics should bottom out soon.

DIA (Dow Jones ETF) demonstrates most clearly that the party is over:

This security looks determined to fill that gap. It will probably then bounce but I don't see any way that it will clear the prior top. I believe this is now a bear trend for the Dow.

Let's look at the dollar. Here's UUP (dollar index ETF) on the small chart:

I've attempted a wave count here. I believe we're heading into a 4th wave correction which will lead to a final 5th wave. A resurgent dollar tomorrow could set the stage for DIA to fill the gap and for SPY to sink a bit further. Let's look at the big chart for UUP:

My original thesis called for UUP to make a new low and as you can see from this chart that thesis is right on track. We're just a few pennies away. We filled the gap today which should trigger the bounce I mentioned in the small chart. Then one last drop. Notice how the indicators have all found support levels. The bounce should create a "W" on the composite and will allow the RSI to fall to the lower support level.

Finally let's take a peak at TLT (treasury ETF):

Gratefully, the inverse relationship between SPY and TLT reasserted itself today. I'm counting on that for building my treasury position for the bear market. A dollar rebound should set TLT a little bit higher, but I am expecting it to retreat and fill the gap before finally surging upward. Note that stochastics are at resistance as is RSI and that composite has made a W. All signs are for TLT to head downward, yet I still expect a little blip up first.

The chart itself is jagged as all get out. This is generally a B wave which indicates that we're retracing a motive wave that has already begun. The next wave would be a 3 wave which should be quite powerful.

So after writing this blog post I decided to reduce my long market position! Still not time to go short but the market looks set to fall before it rises. I'm happy to be wrong and let my now small position make a little bit of money but happier to be right and then increase my position on a day that looks like it clearly will surge.