11.1.2011 -- Has "It" begun?

Ugly 2 days, just nasty. We crossed right up over the 200dma for a day, still continuing to rhyme with 2008, and then reversed hard.

Could this be the beginning of the big fall? The one to finish off the great de-leveraging? Yes it could. But, it could also just be the B of an ABC correction still. So, we'll get into how to tell the difference.

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Key Levels

Upside -- 1229, 1243, 1273

Downside -- 1215, 1190, then air til 1011-1040

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SPX Daily;

We closed at an important level. Just barely above the bottom of the bollingers and right at the old closing highs before the breakout.

So, is this just a B with another rally thrust coming, or is this a big wave 3 down? How can we tell?

So far, this appears to be a big wave 3 down. The selling is fast, furious, broad and powerful and it's occuring on consecutive days. If this is a big wave 3 down, it will be VERY VERY powerful. If it's just a B, we will see the market lighten up here very soon and start seeing some strong bullish reversals back to the upside. You still will get counter rallies with a big wave 3, but they will come after many multiple days of selling and they will be fast and furious reversals that only last a day or 2 or may even reverse intra-day. If it's a B, we should see the selling more slowly abate and start to see some boring days of the market messing around and acting like the selling is tired.

Here's a way to look at it;

5 days if this is a big Wave 3;

Day 1 - Panic (down 250 on the dow)
Day 2 - Panic (down 200+ on the dow)
Day 3 - Panic (down 400 on the dow)
Day 4 - massive rally until 3, massive sell off into the close
Day 5 - Panic (down 300+ again)

5 days if this is a much much smaller B Wave;

Day 1 - Panic (Down 250)
Day 2 - Panic (Down 250)
Day 3 - Big reversal (Up 220)
Day 4 - screw around, up down up down up down (40 up)
Day 5 - Down (80) selling getting tired.. a big up move is coming

Some other things that will clue us in that this is a big wave 3 down;

1) If we break below the 50dma again here on a close
2) If the big down days just keep stringing together
3) If growth stocks, banks and leaders just don't participate in any rallies
4) If the leadership in the rallies is very very narrow

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Tomorrow should be a clue.. if we panic sell AGAIN tomorrow.. OR.. if we open higher and then proceed to reverse and panic sell again.. we will look more and more like a big Wave 3 is occuring.

Targets for a B wave -- 1190, then a rally back to the 200dma

Target for a big wave 3 down -- low 700s, potentially by February

GL

CJ