Thanks for sharing your thought and being a nice audience of my wave threads. I have started a blog as my trade journal to post my real time trades there to share with friends. Welcome to take a look. Thanks!
Yes, the 5-wave pattern on SPY (or SPX) is well defined. 1,357 (Wave "A" low of the bigger Wave 4) was breached, however the March low of 1,340 was not. So the question is this: If the "A-B-C" of 4 is now complete, is the market now in [V]? If so, then one can view the sharp intraday rally from the bottom as "A" which should create a pullback buying opportunity in "B".
ScalperJoe - Good observation! To answer your question, I woud like to bring up the two scenarios that we might have: 1. If the big wave- was completed on 11/25/2011, then we could have a wave-V to test last month's high. 2. If the big wave- was completed on 12/19/201, then we are in a down trend now. Any up move will be corrective wave. I'll post the charts of these two scenario on my blog in a little bit.
Ok, so if the March low of 1,340 holds then I agree with scenario 1 that the market would rally as a wave [V] for a retest of the highs. If it doesn't, then one target for scenario 2 downtrend is the next fib level of the bigger 5 wave pattern, which happens to correspond very closely with the Wave 1 top of around 1,293. Given that the 100day moving average and two large daily tails offer support on the SPX chart, it seems more likely that your scenario 1 will prevail. These corrective wave patterns are quite tricky, and definitely have more headfakes than the clearer Wave 3 pattern.
ScalperJoe - Good point! Yes, the 1340 is the wave-4 (the lower degree wave) where a corrective wave would stop. Thanks for summerizing those two scenarios. Today the market gaps up, we will need to see if the gap can hold or not. If the gap holds and market goes higher, then probably the wave-[V] is underway. If the market fails to move up, we need to be careful that it could be forming a wave-2 (corrective wave) in the scenario #2.
PerfectEW.blogspot.com I set up the blog last week. I have started posting my real time trades there. Thanks for commmenting!
Decision time. Wave 4 typically does not go below the fourth wave of the previous impulse wave. Notice the horizontal support on all the major indices? If we go any lower, Bernanke and The Bulls are going to be in serious trouble.
Yes, the horizontal support is definitely holding it up. Also, the market is almost equally distant from the top of Wave 3 (1,422) and the top of Wave 1 (1,293), thus causing a very choppy and rangebound current pattern. It's a classic struggle between the bulls and bears. No need for the bulls to worry though, Uncle Ben's got his helicopter ready, and will be flying all over dropping freshly printed fiat currency like leaflets in a war zone!