Expecting Clarity This Week

I expect some clarity this week in regards to the two scenarios I laid out last week. The large drop in the markets were not a surprise. This drop should continue for a few days and end with the SPX in the neighborhood of 750.

In reflecting this past weekend I have reduced the chances for the bearish scenario. I am now 75% behind the bear rally scenario and will be playing this. I expect that prices will reaffirm this view later this week and into next giving me clarity and confidence to play the long side going forward.

Also as we complete this wave we will begin to get some relationships that can provide us with likely targets for this bear makret rally. As is stands right now, I am targeting anywhere from 950 to 1150 and a time frame lasting through the end of the summer. Since the first wave became extended in price, I lean toward the lower end of the targets. I am leaning toward somewhere in the 975-1050 range. This will become more clear as we complete wave 2. Also note that we have major resistence near 950, 1000 and 1050. So these price levels are all logical ending points.

Keep in mind that according to EWT wave 3 is the most profitable and easiest wave to play. If this is the case we need to be properly positioned once the current wave down ends. It could be as early as next week that we begin wave 3. During this week I will be making a list of long candidates to ride up in wave 3. I will post this list when I make it.