Thursday, August 20, 2009

10/07-Present 1d Chart

It appears that B of (Y) has bottomed, so this is an opportune time to discuss final targets for this bear market rally.

Assuming an intermediate degree double zigzag is unfolding as shown, there is one more wave remaining, wave C of (Y). Wave (W) was a very typical zigzag with waves A and C very close to equality with wave A the sharpest. If A and C of (Y) reach equality, S&P 1120 or so will be reached. Using A's length, additional targets are shown in blue.

If (W) and (Y) equality is reached around 1160 with other purple targets shown.

The yellow values are retracements of the last bear market decline that took place from the 1576.09 October 2007 top to the March 2009 666.79 bottom. 38.2% (1014.14) has been reached but it appears prices will move beyond that level. 50% is the next target at 1121.44, almost exactly the equality point of waves A and C of (Y). But keep in mind retracement values are not the best targets, they are better used as benchmarks for the market's correction.

The last set of levels shown are in green. These are the S&P 500's 2009 Fibonacci support and resistance levels found using Jeffrey Kennedy's method. Jeffrey Kennedy works at Elliott Wave international and is a very talented analyst and trader. Notice how the market bounced off the lower 100% level. The upper 61.8% and 100% levels are near 1030 and 1083, respectively.

Resistance zones are also useful. Notice some resistance is ahead around 1045, the point at which waves C of (Y) is close to 61.8% of A of (Y).

Finally, when the market approaches its top, expect divergence on a variety of technical indicators. This should occur regardless of the size of C.

Exactly how far the market goes is not clear but I would guess something in the 1065-1100 range with potential to move higher. The bullish percentage is already at an extreme and it will not be able to hold these values for long.

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