SPX 09-10-30

Last Thursday, Oct. 29, 2009, I went short with what's left in my trading account. I'm now fully short the S&P500. Let me explain why. Here is the picture I sent my friend on why I went short.

I said in my previous post that I want S&P to break 1020 first then have a retracement to the 38.2% fibonacci level. Last Thursday's move was just to strong so I let go of my 1020 break requirement. Near the end of the trading day, the market was sitting on this 38.2% fib level (1064.79). In addition, the market also tested the upward sloping support-turned-resistance line. These 2 reasons were good enough for me. I had my stops in place so I knew the risks as I went in. I went fully short at the end of the day.

Friday was just an awesome day! The shorts I bought were all making me smile. Profits weren't the only reason why I was smiling. Here's another reason why I'm smiling:

This is the hourly chart of the S&P500 index since the high it made back in Oct. 21, 2009. As you can see, we have 5 clear waves down. This is textbook elliott wave structure and this tells us that the main trend has changed to the downside. Hooray! Now I could be wrong and there could still be further downside. This means that my wave 5 label will be moved further down. I wouldn't have a problem with that.

Now let's take a look at the latest chart:

So just to summarize, the long term trend line that connects the March '09 and July '09 lows has been broken, the short term trend line that connects the August, Sept and Oct lows has also been broken, and 5 wave impulsive move to the downside. All of these point to the main trend changing to the downside. I still require one last thing to be fully confident about the change of trend. I still want 1019.95 to be broken STRONGLY. If that happens, then let the fireworks begin.

Welcome to the new world. Welcome to Primary Wave 3.