Market Timing Update (5/25/10 Close)

[EOD-4PM close] Stocks
Today's low in June SP500 Emini came within 0.5 index points of the February low, and that in the SP500 cash index fell below its corresponding February cash index low. This conveniently eliminates the remaining bullish P2 count, the 7 waves up scenario, which I have kept on as an option in since the April peak.

It's nice to have all top counts being bearish, at least for the next few days, weeks. This may itself be a nice confirmation of a trend change to the downside.

Based on market internals, the decline which started yesterday is likely a fifth wave or a b-wave. The internals within the subsequent rebound have been on the moderate/weak side so far.

Again I see three logical competing counts, which are highlighted in Chart 1. I continue to focus on the E-mini actions to get the benefit of global and nocturnal participation.

[Red] [i]-down of 3 of (1)-down ended at the overnight low. Wave [ii]-up of 3 of (1)-down is now in progress. Chart 2 offers a squiggle count.

[Blue] Wave 1-down of (1)-down is still in progress and the overnight low is only [iii]-down of 1-down. Today's rebound is [iv]-up of 1-down. See Chart 2 for a squiggle count.

Note that 1-down could turn into a leading diagonal, but is not required. At least in the e-mini, we do not have overlapping [i] and [iv] yet.

One difference between the [Red] count and the [Blue] count is the upside potential of the rebound. Wave [iv] in the [Blue] count is limited by the wave [i] low, whereas wave [ii] of 3 in the [Red] count is capped by the wave 2 high, theoretically.

The bearish divergence between price and RSI in chart 1 may support this count.

[Green] It's also possible that wave 2-up of (1)-down is an expanded flat. The pre-market low could be wave [b] of 2-up of (1)-down.

There you have it.