Wonders To Behold

One chart that interests me this morning is NYSE NEW 52-WK HI LO DIFFERENCE which shows new lows breaking below the June lows. In other words, more new lows now (177) than back at the June lows (134), thus the market is saying it is already weaker at 1355 than it was at 1266.

This indication combined with the market action of the last two days means the chart below doesn't seem so outlandish anymore.

Obviously it has not been updated, but that probably makes it easier to read. I still think a bounce is near, and I still think new highs are possible. But I am looking at lower levels to come.

Another thing. The "official" Elliott Wave count has the S&P in a third wave down which is the most vicious. The character of third waves makes them useful as analysis tools. Frost and Prechter described them as "wonders to behold" in their book, Elliott Wave Principle. Anything less than a gut-wrenching decline in the next few days will be signal that a reversal is on its way, and that bearish wave counts are suspect.

Yesterday the S&P got to 1352.50 after breaking down. A new low at 1350 or 1346 could spark a bounce. 1370-1377 could be the first stop. Higher levels could occur too.

Another breakdown would have me looking for roughly 1316-1319. I would not like this to happen today because I own SPY 137 calls from 1365. I knew I was probably early on that trade, but plan to buy some lower strike calls if given the chance.