Perhaps it was the nap or the milk but regardless, when “Frisky the bear” woke up, he/she came out swinging. This decisive move down on the SPX broke important support at 1344 and 1336 (see chart) and closed just above the low of the day at 1325.51; a 2.23% loss. This corrective wave possibility was anticipated in my recent blog “Decision Point.” The importance of the 1344 area was discussed in my recent “Respect the Blue Line” blog. Incidentally, coincidence or not, 1344 is almost exactly the mid-point between the April high at 1422 and the June 4[SUP]th[/SUP] low at 1277. Frisky the bear was not content to stop here, but also took out the previous intermediate wave high at 1336 on the way to 1325 (1267-1336-1307-1363). Today’s wide range red candle ended near the low of the day, indicating the selling is not over.
The other indices had similar fates. The VIX shot up 16.5% after a slow start and tagged the 50 ma. Meanwhile the US dollar is back in an uptrend gaining 0.87% to 82.29.
What’s next? It appears that five intermediate waves will be unfolding, and judged by today could be fast and furious. Don’t rule out a drop to SPX 1200 area or even a little lower. Intermediate waves two and four will be the ones to try and capture for a payout. We will need to see how the minor waves develop to try and predict these turns. At this point, I am thinking that the 1292-1307 area may be the first turn to start intermediate wave two, but it is pure speculation. This region shows quite a bit of support. Meanwhile Frisky is back to pacing to and fro as bears are prone to do.
