We hit the first target (1038) and turned tail to the upside. Notice the divergence of the MACD histogram. This is typically found between a 3rd and 5th wave as it confirmed that wave (i) purple was completed. I must admit, the wave structure would have counted better if there was one more decline below 1038 reaching the 1030-1034 targets but I can count a complete 5 wave structure down from wave iv (1080.25). The fact that it didn't results in a slight relabeling of the internal structure of the move down from 1098.5, but it doesn't change the direction or the overall interpretation which was down going into today's session. For tomorrow, this sets up a corrective rally that either completed at the close of today's trade or will develop in a more complex correction. Look for targets and further analysis tomorrow morning. Best of Trading
Not much to go over as the overnight session is on stand-by awaiting the jobless claims number at 8:30 est. The chart shows the resistance levels for a proposed wave (ii). As I mentioned last night, the wave either compleeted yesterday or will develop in a more complex manner. Therefore, all I can offer at this point is a range of resistance between 1061.75- 1071.50. Possibly, we close the gap at 1065.5, then turn south. Let's seee what develops. I'm setting critical support at 1044.75. Any trade back down under this level would indicate that wave (ii) had completed and that wave (iii) of iii circle (green) of 3 (blue) had begin. Best of Trading
For tomorrows trade, I will be looking at two possible outcomes as shown on the attached chart. If trade continues down in an impulsive manner, we need to see 5 waves down to truly confirm that wave (ii) had ended. A push up and a break of the red trendline would leave the door open for the gap to close at 1066 or any of the above mentioned resistance levels stated from last night. Tomorrow we have the GDP report before the opening bell. I expect some early volatility. Best of Trading
Another week has come and gone and the only thing that the bears can say is that the market lost (6.25) for the week. The last time I made a post, I offered two scenarios for Friday. The upward wave (ii) purple scenario played out after extending the b wave down, re-testing 1037.25 in a flat correction. The pattern is close to terminating. Key resistance levels cited between 1061.75- 1071.50 and the gap at 1065.5 remain. The game plan remains the same, i.e. looking for sell signals at these levels. A break of 1037.25 would have at a minimum a bearish downside potential to 1002.75. Interestingly, yearly cycle work dating back to the 1987 low confirms the general direction of the market and wave count. Several yearly cycles anticipate a low by 10/29/2010. The 9-month shorter term 1/2 cycle of the 18-month cycle crested at the top of wave 2 circle purple (1216.75) and is now working down. A bottom of the cycle is anticipated by 1/31/2011. Only the 18-month cycle argues that the market may hold up a bit longer before resuming the decline to much lower levels. A crest of this cycle is anticipated as of 1/31/2011 and pushes out the cycle lows to 10/31/2011. Best of Trading
From my week in review, I stated several resistance areas. In the pre market, the overnight session reached 1072.75, and closed the open gap. Although price never tested the area again during the day session, my interpretation of whether wave (ii) purple has terminated is still open for the time being. Currently I can only count three waves down . Counting 5 waves down confirms that wave (ii) had ended. A break below 1037.25 would bolster the bearish view. For tomorrow, I'm looking for a minor bounce for wave iv, followed by an impulsive decline . In the meantime, I am dead wrong on my count and expectations if price trades above 1054 thereby creating overlap. Best of Trading
My interpretation of whether wave (ii) purple has terminated is still open after another day of trading. market found support and trade has turned back up, keeping the the possibility of a larger upside correction on the table. Yet, prices still have not moved beyond the 1054 mark which would signal that some form of alternate count or sideways pattern was unfolding. While I think the price structure is definitely corrective in nature, as indicated in the light blue box range, until there is an upside break of 1054, I'll favor near term downside pressure. What may be occurring here is a combination pattern for a developing wave (ii) purple and the market is just marking time before terminating. I'll need to see more of the internal structure before I can confirm such an assumption. Whether the market continues down hard or meanders sideways , the operative direction remains down with much further downside potential. Best of Trading
Jobs report just came out and the futures are flying higher. Does anyone think that the market manipulators get the reports before us? Of course they do. At the time of this post, the market seems to be challenging the gap established on 8/11/2010. I don't know if the market has the muscle to close it but the thrust off of 1039.25 appears to be too strong for the current count. Open interest and volume over the rally continues to fall ... so technicals still indicate that shorts are liquidating positions. This is only a corrective wave structure. Once this rally exhausts itself, trend should resume down. Best of Trading
Looking for confirmation that a tradeable top is in place. Trade closing Friday's gap (1090.5) in an impulsive manner would be what I need to see to act. Best of Trading
The market concluded today's session with an attempt to close the gap from Friday. On a closing basis, the gap is still open. As I mentioned earlier today, I need to see trade below 1090.5 to conclude that several other wave interpretations can be taken off the table and to place any bearish positions. Trade below 1081. 5 would bolster the bearish case. The chart presented tonight is a "best" interpretation of the wave structure that calls for selling pressure. It is also quite possible that other alternative counts are best suited and another high may be in order. We'll have to see over the next few days what the market has in store. In the mean time, caution is advised and position sizes should remain small. Food for thought - Turning to the larger picture, the elusive, wave iii of 3 down, has not materialized leaving me cautious as if I smell a fox in the chicken coop! At the daily chart level, the market has meandered sideways for 3 + months. This is not the kind of price action one expects if we are truly in a third of a third. However, the larger count ( not shown) is still the highest in probability and should be maintained until such time as price renders us wrong. In the meantime, there is nothing wrong with looking ahead and playing "what if". Several possible explanations are available, although premature. Could we be building a triangle B wave that counts the decline from 4/26/2010 as an A-B-C structure or are we building a combination wave 2 pattern? Bottom line is that the market will get as many participants on the wrong side before it tips it's hand. Let's see what unfolds. Best of Trading