Negative divergences cropping up as stock market tests time & price symmetry on Bradley turn date window

Folks, the rise off the 1040 $SPX area was expected but we weren't totally prepared for how far, how fast - well, at least some of us were not, yet some of us were more bullish! But where are we now? Andre Gratian pointed out that yesterday was a Bradley turn date, and those normally have a time window of a couple of trading days either way. On the $SPX chart below, I show how we've also tested almost exactly a time and price symmetry if this is finishing the upward "C" wave of an ABC zigzag, where that last testing of the 1040 level was a B wave low. The "A" wave up took 25 trading days, and the "C" wave has been 24 trading days so far. Price symmetry would be just pennies above 1058 in the $SPX and we almost touched it yesterday. Therefore, IF this ABC zigzag is the right way to see the market now (and it might not be the right way - though it corresponds to Tony Caldaro's alternative Objective Elliott Wave count, and I do feel the ABC idea has some merit), then the market is readying for another substantial drop. How far? Well ... if you're using Tony's alternative wave count, then the $SPX could test down perhaps to the 940 area .... However, if you're more bullish than that (like his primary count), then you might be thinking of a nice pullback perhaps to the 1105 $SPX level (or maybe not even that low).

We've also got reasons that Terry Laundry has been posting at his T Theory site (see the sites list at right) for expecting one more rise into the November 6 through 10 time window, after whatever pullback we get, and honestly I wouldn't want to predict right now whether a rise into early November would produce a higher high or a lower high.

If you're uber-bearish then you're counting the rise we're seeing now as the C wave of a larger ABC "second wave up" that will roll over into a wave 3 down (maybe even a Prechterian wave 3 of 3!). I'm not really thinking that. Still, I am positioning defensively and look at the negative divergence I've marked on the $SPX chart, below. Also check out the Nasdaq ($NDX or $COMPQ) advance-decline chart further down ($NAAD) - people are always talking about and charting the NYSE ($NYA) advance-decline ($NYAD), but it's a bit flawed in my opinion because it includes bonds as well as equities so not as pure for charting advance-decline data for stocks. You can also see the McClellan Oscillator in the charts below, as an indicator, both for the NYSE ($NYMO) and the Nasdaq ($NAMO). In both cases, the McClellan Oscillator is testing its own moving average.

There's a sentiment indicator that works by looking at the COT (Commitments of Traders) data - I keep links for that in the sites list at right side of the page here. I haven't referred to it in a while. But check out this article, "Smart Money" S&P 500 Traders Abandon Ship (COTs Timer, 9/25/10) - Alex Roslin has some very interesting techniques for trading using COT data, and he's mentioning October 4 as a turn date which would even get the stock market to the 25th trading day I mentioned (regarding the time symmetry, above). I don't know if we'll see it tag 1058 in the $SPX and I'm just as happy to work off the time symmetry. I've also wondered if there's a bearish wedge that formed on the hourly charts but I don't think it's so well-formed that it's worth showing at this time.

Now, we're going to look forward to seeing updates this weekend from other talented analysts, including Andre Gratian of course with his Market Turning Points update, and others such as Tony Caldaro and Terry Laundry. Meantime, I must also point out that the QQQQ has found resistance in the area of $49.60 which is a Fibonacci .786 retracement to the April highs. So even though the stock market and the QQQQ's have broken out in a manner that triggers bullish point and figure (P&F) projections, there are Fibonacci reasons as well as the negative divergences to think that some level of a pullback or correction is coming. We should get good clues from the market movements over the next week or so on what type or level of correction it is and what it may mean for the markets for the rest of the year.