With US equities seeing renewed downside - after having notably failed across Mon/Tuesday, the door has re-opened a rather interesting scenario for the autumn/early winter. If the bears can hit the 1920/00 zone before end of next week... things get real interesting.
sp'weekly7a - H/S scenario
sp'weekly9 - fib levels
Summary
Suffice to say, despite not being short today, I was delighted to see some renewed downside. With the break to the low 1940s, the more bearish scenarios are back on the list of possible outcomes across the remainder of the year.
The key issues...
Bears MUST attain at least a hit of the sp'1920/00 zone. It is not necessarily to hit exactly the August low of 1904.
Even if the bears manage to push lower to 1920/00, they will still need to contain what will likely be a VERY strong multi-week bounce across mid/late October. At minimum, the bull maniacs would probably be able to muster the 1970s.. possibly even the 1990s. On any basis, if there is ANY break >2000 on the bounce, then the H/S scenario would get dropped.
Fibonacci retracement madness
The inter'2 (or whatever you want to call the summer 2011 wave) was a strong 38% retrace. Right now, that would equate to roughly a down wave from 1970 to 1650 or so.... a clear 300pt drop... roughly 15% for the broader market. I'll be the first to admit, that for the moment, such a scenario is in the land of 'crazy talk'.
For now, such a scenario is indeed the stuff of bear dreams... but its good to dream, right? So, lets see if we can first hit 1920/00, and then see if the bounce can be contained, with the market getting stuck somewhat around 1970/90, no later than mid November.
Looking ahead
We have the usual jobless claims, factory orders, and the Nat' gas report. There are also 2 fed officials on the loose, and as ever, Mr Market will be listening.
*there is QE of around $1bn.. which is 10% of this months total.
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Goodnight from London
