Stock Market Crash Day 7 Market Breaks Last Trendline Support

Today was a very key day in the stock market and the sp500.  Today we broke down through with conviction what I consider to be the last remaining supportive trendline of the advance since March 2009.

Not only was this line broken with a wide price spread, but was also done with volume conviction.  It was also a gap down on most indices and ETFS.  This is important because in terms of candlestick charting techniques a gap down out of a large bearish flag pattern is to be considered an ‘opening window’ in terms of price trends.

So to me today was the initiation of the next major leg down after a frustrating one month long consolidating flag pattern on most indices.

A Few Final Astro Thoughts

I have to conclude that the Astro aspects DID work, but not in the time frame and timing as was first expected.  The big astro aspect that was June 28, 2010 and also an eclipse and the initiation of the cardinal climax seems to have gapped the market down and started this new decline phase. 

I wish I had known that a month ago that this Astro aspect was supposed to be an initiation instead of a climax that price moves into. 

It is important to know that the next major Astro aspects are August 10th and 12th 2010 according to Larry Pesavento.  These two dates are so big in terms of Astro aspects that we will likely see unprecedented price move into that date or a massive geopolitical type event happen.

August 10th and 12th are only about 30 trading days away.  So we are talking about 30 full trading price bars or candlesticks before those dates occur.  Based on the way the charts are setup right now I have to conclude that these mid August dates will be a major low at this point.

Price Moves the Rest of this Week

The fact that we have a 3 day holiday weekend coming up end of this week makes the speculation about possible price moves somewhat more difficult.  Why?  The reason why is that the days before and after this weekend are typically low volume for obvious reasons.  So the question then becomes how will this market manage to get any real movement right before or right after this holiday weekend.

The fact that we broke down through trendline support and did so with a big down candle has me thinking that the most ideal scenario is for a bounce that starts tomorrow (perhaps after initial morning weakness and then a reversal candlestick hammer by end of day) and then follows through to the upside on Thursday, July 1st, 2010.

Then a bad jobs number on Friday sends the market down hard again right into the 3 day weekend.

There are many different scenarios, but generally speaking I expect a big ONE to TWO DAY bounce from either the 1040 level or slightly lower right back up to near the 1060 to 1070 level on the sp500.  Ideally this bounce will be on very light volume and will kiss the red uptrendline shown in the chart below.

First sp500 Target is 950

If you have been reading my posts here you probably have seen me write about 820 on the sp500 and even lower (780 would be the 87 crash equivalent low point) in an repeat 87 style crash scenario.  The problem is that such a huge move while gratifying to the bears just seems too hard to fathom.  It is too difficult for me to believe that such a huge fast move can occur again exactly like in 87 despite all the eerie chart pattern similarities to the 87 crash.

The 87 crash type decline had such a speed power like an unstoppable freight train.  It just seems to me that if we get a big move down to 950 Ben Bernanke and Company will start to throw a few trillion dollars at the stock market again.

I suppose the best way to strategize the coming decline is to keep two scenarios for the decline and then just let the daily tape action guide the way.  If we are in an 87 style then it should be blatantly obvious.  You will see simply a series of larger persistent candlesticks that grow in size over a series of 3 to 5 days.

The waterfall decline scenario at the moment is my preferred scenario.  It simply says that we get a series of two mini crashes.

The first would stop us very close to the 950 area on the sp500.   After hitting that low I would expect the 1030 to 1050 area to act as a magnet and see the market rally hard right back up to that range as a test of the previous resistance area.  Then the market would start to break down again into the August and September time frame eventually breaking down through 950 and much lower.

The waterfall scenario seems to be the winner at this point. 

My reasoning is that the 950 area is very strongly supported from multiple levels as you can see in the chart below.

It is too hard for me to believe at this point that the market is just going to slice below the 950 and head straight for 780 or 820 in a one day 13% to 20% decline.  Anything is possible, but it just seems too unlikely.

I suppose what could happen is that you could see a huge one day drop that closes right at 950 and then the next day see a huge intraday downside move to 850 to 900.  So 950 could be penetrated on an intraday basis, but ultimately I believe price will come right back into 950 on a closing basis and rally hard back up to recent resistance levels of 1030 to 1040 before falling later in the fall time frame.

As I said earlier, August 10th to 12th is only about 30 full trading days away.  That is not that much time and so for us to get maximum leverage until that date requires that we get to 950 pretty quickly, perhaps by as soon as next week.