Head Fakes and the Bear Flag/Pennant

I have a few charts and one paragraph to post, first the charts...

 The overall bear flag divergences on a 30 min chart-for newer members 30 min may not seem like a ling time, but a 15 min negative divergence is all it took to turn the market down from the May 1 highs, a 30 min chart is much more influential and this is a much bigger divergence in leading positive position, a divergence this big rarely fails, I can't remember the last one this big to fail.

It's all about the bear flag/pennant in the white box.

The medium term strategic outlook is pretty firmly set. As for the Big picture Primary Trend, that is also firmly set.

Daily 3C leading negative divergence, very ugly, a daily leading negative divergence this deep and this fast is very rare, the big picture is this market is in a boatload of trouble. However, firt things first and that is the medium term outlook.

As I mentioned this morning, just because the market is extremely bearish doesn't mean it can't or won't put in a spectacular counter-trend move to the upside.

 To the left is the 1929 Dow Crash, there were at least 5 counter trend rallies, the first lasting about 5 months for better than a 40% gain and during a raging bear market. To put that in perspective...

The SPX recent rally from the October lows, about 7 months for a 29% gain, as mentioned many times before, bear market rallies tend to be sharper, more intense than bull market rallies.

Now just a paragraph from this post last Friday as I try to anchor expectations and give you some idea of what a move may look like...

Big Picture-Not Too Big

The chart of the bear pennant from last Friday's post linked above and what was written below it...

"Here's the pennant and the white areas are where there have been strong positive divergences, buying price weakness, it's exactly what we did on Wednesday the 23rd with gains in all of those positions, the same thing seems to be happening, whether we move to the lower trend line and post a head fake break down move or not is difficult to say, but I think the upside head fake move is more certain, it's just a matter of timing at this point "


As I once in a while remind you and myself, "Don't get lost in the lines", meaning focus on the bigger picture and use (in this case) weakness as a tactical advantage to further your strategic view. The strategic view for the mid term being a sharp market bounce, for the longer term, a very bearish market and a bounce will just further the cause in being able to short in to price strength.