Thursday, July 9, 2009

Friday 7/9/09 1m Chart

Today the market made some gains on lower volume and once again closed above 878, the possible head and shoulders neckline. Many waves were overlapped with a substantial retracement of the previous sell-off (about 61.8%). Shown is today's chart which may be wave (ii) of [c] of Y of the double zigzag from the 956.23 top. There are many alternatives for this wave but it appears to be setting up for a big sell-off below the 878 area. A large (iii) wave should be coming giving a real reason to believe in the 825 head and shoulders target after [c] and Y completes.

A 5-wave pattern ending yesterday is not as pleasing as the count shown over the past few days but it seems to be the best way to describe the price action. The big rally at the close yesterday blowing through certain support zones was a clue that the count was not correct. So the count Dan showed yesterday evening is the best one but with different degree as mentioned above. As you can see it was not an obvious count with the big wave [2] of iii but it does describe the action best.

The c wave may also be a 3-3-3-3-3 leading diagonal, if it exists, not an ending diagonal. This is the bullish scenario but it does not seem likely especially considering the impulse waves near the close. That 5 wave arrangement may be the 'a' wave with small 'c' wave forming. 'c' would probably need to be an ending diagonal so the 878.45 is not breached. A double zigzag may also be forming with final 'c' of 'y' wave completing or completed.

Wave proportionality of (i).

Besides the bullish scenario above, there are many different arrangements of X's waves to give 5-wave structures.

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