3 Waves Up, 5 Waves Down

Trader Talk

The action today was the exact opposite of yesterday where a rally was followed by a sell-off, which was followed by a late-day surge, while today we saw a drop at the open, a rally intra-day, followed by a late-day plunge. Volume was on par with yesterday.

Officially, the NASDAQ fell 0.2% on 2.4 billion shares, while the Dow Industrials dropped 1.8% on NYSE volume of 5.4 billion shares. The leadership profile remains negative, with 103 stocks making new highs versus 225 stocks making new lows.

The short term momentum oscillators remain negative, confirming the bearish stance of the AlphaKing Trading Indicator. We have no new trades at this time.

The overall pattern remains solidly bearish, with the downward stair-step pattern of lower lows and lower highs remaining intact. So too continues the bearish trend of five wave sell-offs followed by three-wave partial recovery bounces. Today's action looks like a five wave down move followed by three-waves up topping action. If so, it should be all downhill from here. The economic news showed weaker than expected GDP growth, and weaker than expected unemployment numbers.

The Big Kahuna of the latter lands prior to the open tomorrow, and could be the last straw that opens the selling flood-gates to confirm the super-bearish potential of the Elliott Wave set-up. As trend-followers with major skin in the game, we look forward to the next stock market buy signal, though so far there appears to be little in the way of hope for such bullish nirvana. When that changes we will gladly change our stance from bear to bull. Till then, watch out below....

Kevin Wilde, Chief Trading Strategist AlphaKing.com.

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