Wednesday, June 17, 2009

Tuesday 6/16/09-Wednesday 6/17/09 1m Chart


The market behaved as I expected with a limited sell-off in the morning hours then a rebound. However recent action off the highs are now looking more like a completed impulse with an ending diagonal 5th than a corrective zigzag or double zigzag. Sure enough Dan posted a chart with the same idea (http://4.bp.blogspot.com/_TwUS3GyHKsQ/SjlSJujOvJI/AAAAAAAAA6A/eGI2_hbabQk/s1600-h/spx5.png) and I agree completely with his analysis. Rather than reproducing that chart I have posted a 1 minute chart covering some fine details over the last 2 days.

The [a] wave count is not certain but this seems to be an impulse hitting resistance with (v) being the shortest wave by a hair ((iii) cannot be the shortest wave without violating Elliott wave theory rules). If [a] was an impulse we should have a [b] wave pullback (may have finished it with the zigzag looking formation near the close) then another 5 wave [c] wave to complete a zigzag. In addition there seems to more correction of the impulse wave down to come, the correction so far has not reached the territory of the [iv] wave and looks small from a time perspective. 928 is a target for the correction, 924 would be a 38% retracement. Also if [v] really was a ending diagonal we should have a hefty retracement of it.

Waves (i) and (iv) of [v] did not cross (missed by only 0.02) but did cross on other indices. It is important to note that we cannot use other indicies to determine the S&P 500 count but it is something to think about. I view the crossing within ending diagonals more as a guideline to be taken very seriously than as a rule. One reason for choosing this pattern over an impulse is due to the zigzag nature of waves (iii) and perhaps (v); those counts come much more naturally and (i) can go either way. Also we came so close to crossing with [v] clearly wedging (with each succeeding wave getting shorter) that it may be more unnatural to think of [v] as an impulse.

So far for a correction following an ending diagonal the waves have not soared back above 920 and that is a sign of weakness just as the lack of crossing can be viewed as market weakness, at least for an ending diagonal. But the ending diagonal took days to form and the correction will not happen immediately.

We bounced off of the 200 day moving average but it seemed a bit weak giving doubts that this is still primary wave 2.

Problems:
The wave (i) of [v] looks more like an impulse to me than a zigzag. The impulse alternative was charted on my last post.

It is hard to make out 5 wave impulses on some of the other green minute waves of the larger impulse at this point.

Alternatives:
Any type of zigzag combination down from the 956.23 highs.

This could be the start of primary wave 3 or just a larger correction.



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