Rules Before Bias

S&P futures are in the green this morning, and the break above ES 1614 could signal a partial rebound for today. Asia had another washout after the continued slide in US markets, while Europe is up.

It's the yen, however, that's looking shaky. There is an ominous triple bottom on the hourly chart that looks like it's getting ready to break, but who knows. The yen will continue to look constructive to me unless 96.997 breaks, but a break of the triple bottom could set up another down leg in the S&P before a more significant rebound.

Regarding a rebound, I think the market is setting up for one soon. For such an aggressively bearish "official" Elliott wave count, there are far too many Elliott rules being broken by the sub waves of this decline. At this point it would take an outright crash for the count to be valid.

Interestingly, an "alternate count" -- a much more bullish one -- was quietly added to the official count last night without any reference to it whatsoever. I strongly dislike this practice, which is basically "having their cake and eating it too." Slipping in an alternate count without comment, ostensibly for the purpose of taking credit for it later, is not something I applaud. Let's hope I'm wrong.

The bottom line here is that the market is starting to give clues that it may be ready to suck in the last shorts and spit them out, again. And even the "official" Elliott wave analysts are taking notice, even though their outright bearishness has clouded their analysis for many moons.

NO method of technical analysis can withstand being subjected to one's personal bias and yield accurate results. One of the best things about Elliott wave is its rules. But if bias causes one to ignore the rules, then it's not Elliott Wave. It's just really bad analysis.

Yesterday as the market fell, there were multiple divergences, and they were positive ones. Down volume, advancers vs. decliners, ticks, new 52 week high-low difference, each showed small but definitive divergences against previous down days. Nor was there an increase in overall volume. To me, this says "heads up, traders."

The S&P could easily get up to 1630 from here. It could then plunge to below 1600 and freak people out who should be buying instead. Any more divergences or broken Elliott rules as the market falls would make me very bullish. From the 1600 level, there could be 100 S&P points at stake. I intend be along for the ride.

I don't intend to do anything stupid, though.

I have been feeding out SPXU (short ETF) to those who wish to pay me a lot more for it than I bought it for. On a bounce I will add more against 1646.53. The SPY 168 calls that I was using near the top will go out worthless on Friday (but I was able to get out of the 167s with profits). Anything above 1646.53 would cause me to shift strategy to accumulating longs on any subsequent dips or flushes.

I heard this Carly Simon song yesterday after I was finished trading. It was like hearing it again for the first time. It reminds me to "be here now."