Thursday, July 16, 2009

Thursday 7/16/09 Market Update

It looks like Dan beat me to it today, his count is shown here and shows the general idea. Notice the nice proportionality between the waves and the alternations in most of the corrections.

The market did make another gain today as I suggested yesterday. A clear (iv) wave triangle formed today setting the stage for wave (v) to 943.96. The triangle's apex ends just after the peak. There was also a possible iv of (v) wave triangle with its apex also pointing to the peak.

Using technical indicators (MACD, RSI, etc.), divergence was seen on 30 minute and smaller charts. This supports the idea that the market should pull back tomorrow and form wave [iv]. I would expect a sideways correction of some kind such as a triangle or flat correction since [ii] was a zigzag pattern. Note also that [ii] completed in about 3 to 4 hours and this correction should take at least that long.

A 23.6% retracement of [iii] is 927.17, roughly the low of the (iv) triangle. A 38.2% retracement is 916.78 but I would be surprised if [iv] goes this deep; [iv] should be a sideways correction and this target is in the 3 of 3 territory, past many resistance areas. Retracements of the entire action can also be used but similar numbers are found since [ii] was so deep. Note also that the ac line of the (iv) triangle may act as resistance for [iv] but I would expect the line to be broken at some point. The market has been strong and this should continue until proven otherwise.

Completing on [iv] will set the stage for [v] with its target will be discussed after [iv] ends. But as mentioned in previous posts X may still be underway, it may be an expanding flat completing after [v] tops; the completed 1 wave impulse under the current labellings would really be X's 'c' wave. As it stands now, the possible 'c' wave is just over 161.8% of the length of wave 'a' of the possible expanding flat by about 5 points. The 'a' wave is about 61.8% of 'b' wave missing by 4 points. In any case it is possible but I do not see it as likely. The market will need to prove its supposed weakness before we force a bearish pattern onto it.

For now the best count is a very bullish wave 3 on the way with wave 1 competing soon. If this does not play out, the next best option is wave 1 really being wave A with C on the way. This will not be known until the magnitude of 3 or C is seen. Note finally that given yesterday's alternative count on the YTD chart, 1 may really be [1] with future completing waves' degrees dropped down by one level.

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