I own some ERY with an average point of entry near the SPY 77 - 80 level.
Friday was option expiry day for SPY and major market players needed to bounce SPY to the 80 level to maximize profits.
I admit I am not an expert in counting smaller waves, but allow me to present you with the Elliotte wave counts.
Note the relatively short Wave 4, which did not even make it back to the 110 level....which brings into question whether Wave 3 has actually ended...? Technically we have breached the lows from back in 2002 so this is a whole new ball game.
I have to admit that, I am holding on to a nervous short on Energy. I base my decision on XOM which is my barometer for ERY...which is just 2 dollars away from the maximum pain. As long as Crude Oil prices keep falling, I will hold on to this shorts.
In the weeks ahead, the issues on my radar are the auto bailout and possibility of more bank failures. My main concern is the amount of job losses in those sectors that can cause job losses in other sectors as well.
Sure the government can bailout the auto sector, but who is going to buy the automobile for the next year or two. So there could still be round two or three of more begging for more money.
This recession could be deep until jobless people find employment again!
Conclusion: Less demand for Crude Oil, Energy
On Monday I will base my trading decision on the SPY chart below
Strategy
1. Some fellow think we are going to rally...sure....that is a possibility. Get above 82.4 with volume and we are in for a rally to retest 85- 86
2. Break below 79.4 and then we are back to about 75.
3. Break below 74.43 and then we are heading to 70.85
4. If none of the above, then we will most like trade sideways in a tight range for a while.
My picks:
For shorts: ERY
For longs: ERX
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