Last week, I wrote to you about why I see the market headed significantly lower in the short term. Now, with additional market data available, it looks like March 2010 could bring a top for the S&P 500 – and for the stock market as a whole. Here’s everything you need to know to spot the first move lower… and to profit from it.

While the full stochastics are back to being overbought we have the potential for some movement on the upside this week. As of mid-day Monday, the S&P 500 is stuck between a rock and a hard place – 1111 and 1127.

With the S&P 500 Index chart above, you could say that we’ve hit the minimum requirements for a blue small “C wave” or a “5 wave” as shown. Why? It put in a higher high than the little blue A and 3. And while that’s fine, we still need to seriously break the pink line to the downside or make it to the 78.6% level before we can expect a materially lower move.

The Elliot Wave structure — whether you want to call it ABC or 12345 — makes no difference to us since a potential wave above basically say the same thing.

By mid-day Monday, we hit the overhead supply and the 78.6% Fibonacci level on the NASDAQ. Would I be a buyer of this index here? No way.

That’s because both 60-minute charts show that of an overbought nature on the full stochastics and the market just popped. Until the market can make a new high, the name of the game now is to short the rips and cover on the dips.

For those of you who aren’t familiar with Elliott Wave Theory, remember it’s all about trends. This is for you:

With the S&P 500, it’s all about the bottom pink line. We will not get any decisive break to the downside or the start of a C wave until we break this line. This is why it’s an imperative level that I’m continuing to watch.

It’s almost as if about the only thing that is going to get this market into gear is a news-driven pop right now.

Should stock work their way higher this week, I’ll keep looking to add to the short side one step at a time — a little bit here and a little bit there. It’s called courage of conviction based upon chart pattern recognition.

Sincerely,
David Grandey, AllAboutTrends.net
for Penny Sleuth

March 2, 2010

David Grandey

David Grandey is the founder of All About Trends, an email newsletter service revealing stocks in ideal set-ups offering potential significant short-term gains.  A successful canslim-based stock market investor for the past 10 years, he has worked for Meriwest Credit Union Silicon Valley Bank, helping to establish brand awareness and credibility through feature editorial coverage in leading national and local news media.

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