DJIA action for tomorrow is critical to the short term future.

I think everyone knows that I'm modeling that we are very near the end of the 2009 rally.  The question I have is whether it is already over or whether it needs one more push into the 5th wave.  Today's sell off action was not definitive as you will see in the model below.

In short, today's move pushed the chart to and through the bottom support rail for a potential 4th wave triangle.  It would make sense that this happens here because of what appears to be a rising wedge in late August.  If that were a 3rd then we could expect to see 3-3-3-3-3 with a throwunder on the 5th wave.  This seems to be what just happened.  In fact, the throwunder that already exists is enough to mark the E wave of 4.  It could either begin rising rapidly tomorrow and eventually break out the top rail at about the location of the red circle or it could go a bit lower tomorrow before reversing and heading for the top rail.  Either of these are represented by the red path and I plan to set my TVIX stops to $2.60 in case it happens.

Of course, it is also possible to count a convoluted 5th wave in there so we could be in for an even stronger drop tomorrow.  Nobody knows what will happen but that does not mean there is no workable strategy.  The key thing to know is that we are near the end of this 2009 rally and that getting stopped out for a small loss while the finishing waves play out is cheap in absolute terms and even cheaper in terms of peace of mind.

I plan on setting my stops per above and then waiting to see what happens.  If the DJIA falls hard tomorrow with some kind of big gap then the odds begin to shift toward the bears and they go up substantially if the green support rail gets taken out at the blue circle.  But if they go lower and then come back into the horizontal triangle then I will treat it as a 4th wave throw under that has completed and then expect 5 more waves up.

We are really seeing some shark jumping by the longs now who expect "embarrassed bears" to all begin buying now and other fools who think that permanent prosperity and low volatility is upon all stock market participants going forward.  Just dump your money into the system blindly by the wheel barrow full, folks, no need to think critically.  It's all on autopilot courtesy of the fed!

These are topping calls by people who don't even realize that herd-think it controlling their every thought.  They extrapolate recent history into eternity.  These same short sighted people will be screaming bloody murder the loudest when the hammer drops on them.

You will know for sure that the top is in when we get that 500+ point down day I have been writing about for some time now.