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Death Watch

SnP500 daily 34ma support seems to be working today while Compq broke thru it's 50dma but was able to close above that critical support considered by many traders as the do-or-die for the short-term rally.  Indu is nowhere near anywhere but still playing with it's favorite 'break the 50% fibo retrace support' of the most recent rally from Feb 28 and trying to recover as well.

The Futures are of 'different breed of animal' all-together and are able to form a distinctly recognizable 1-2-3-4-5 run down on their 24-hour intraday charts.  However, their 5-th waves have the potential to go into an Extended Sell-off or worse morph into a complex 1-2-i-ii-iii-iv-v-3-4-5 Meltdown Mode:

-    img37.imagefra.me/i52n/aarc/141u_728_ubk...

At this moment, I cannot gauge which one will prevail:   A pullback by SnP500 using the 34ma support on it's daily chart OR ES going down or not as it cycles through Asia, Europe, and the Middle East/Africa.   Looks like ES will have to decide while SnP500 sleeps.

Extended 5th waves happen less often than extended 3rds (or the 1st the longest) during rallies.  Extended 5ths also happen more often to the downside on intraday charts and much more so for Extended 3rds while 1-st waves the longest too infrequent occurrences on meltdowns.

There were only a few instances of Extended 5th Wave Sell-offs (on their Daily Charts) I was able to monitor on Big Cap stocks during the 2008-2009 Meltdown.  Most of them were 3rds extended.  Small Caps can do anything and everything with ease.

Death Spirals are the more vicious type of meltdown since they start morphing into a complex 1-2-i-ii-iii-iv-v-3-4-5 when the apparently innocent looking simple 1-2-3-4-5 sell-off starts showing encouraging signs of reversal or that the time-consuming a-b-c pullback has just started it's long journey up.   Similar situation for Spiral Melt-Ups but the downside has far more occurrences.  They happen once in a while so traders often forget about them before the next time it hits them again.  Technicians prefer to count them with 1-2-i-ii-1'-2'-3'-4'-5'-iii-iv-v-3-4-5.

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Trading Strategies:

These are highly uncertain times, so investing at this juncture is pure stupidity and/or suicidal at best.   I would rather employ the 'Guerilla' or 'Hit and Run' type of trading since there is practically 50-50% chance of either the continuation of a sustained rally or the start of a sustainable meltdown - at least on the short-term basis.

I am long YM after the close and trailing them with stops (with this most recent intraday sell-off supposedly the a-wave or i-st wave down).   Will sell half on a pullback up (for protective profit taking) and keep the other half just in case it forms an a-b-c with a higher low pattern then undergo an Extended v-th Wave Rally on it's daily chart. 

I will be trying to short ES again on a pullback up as a defensive move to protect my portfolio 'just in case' the US stock markets decide to undergo a Major Pullback or a Meltdown on their weekly and monthly charts.

Precaution is now the better part of valor.

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Thursday Feb 24 Update:

It looks like the YM and ES Futures are able to morph into the usual 1-2-i-ii-iii-iv-v-3-4-5 where the 3rd wave is extended instead of the initial expectation that the 5th can extend or the simple 1-2-3-4-5 might morph into a complex 1-2-i-ii-iii-iv-v-3-4-5 Death Spiral.

-   img37.imagefra.me/i52o/aarc/141u_e38_ubk...

The pattern is still far from being confirmed as such but I bought back YM on re-entry into the Daily Chart Wedge Support with stop loss at today's low to minimize possible loss.  Made tiny profits on last trade with trailing stops.

This is a potential Dip Trip Buy Setup for ES and YM as their daily charts lower high support of Jan 18 starts kicking in today.  Usual target is the last higher high.

I will be watching more for an a-b-c pullback up since this run down looks more as an impulsive rather than a corrective double zigzag down or a triple combination down that are more appropriate for a DiP Trip Buy Setup. IF ES and/or YM break above their last high, then most likely my wavecount is WRONG.  I will sell half load on any reasonably looking a-b-c upside pullback.

The 1-2-i-ii-iii-iv-v-3-4-5 run down, however, has a good (but not high) probability of being a triple combination W-x-Y-x-Z since the 2nd and 4th waves consumed too little time as compared to the other minor pullbacks.

Good Luck

3:30 Addendum:  Looks like my Death Watch for US stock markets turned out WRONG.  Somebody else died in Libya (rumor until confirmed true).