Wednesday, August 5, 2009

Thursday 7/30/09-Wednesday 8/5/09 1m Chart

The market closed lower today without breaking above 1007.12 but it still closed above 1000. An ending diagonal is still forming but its count remains unclear.

Some possible counts are shown above, these are the only ones I can see that show wedging. If the main labellings shown are correct, the market will be topping very soon if it has not done so already. A truncated 5th wave of an ending diagonal is not a likely pattern but would be extremely bearish, virtually guaranteeing some sort of gap down tomorrow. On the other hand, another zigzag up (wave y) may unfold completing the (v) of [v] of A wave. Regardless, the pattern has almost no wedging so I have my doubts.

The first alternate shown below would be bearish for the market as it also means the market has topped. The deep retracement of the following impulse is questionable as is the impulse itself. The light yellow dotted lines outline the formation.

The final alternate shown, should it play out, implies a diagonal is still underway with its iii wave not yet completed. This pattern could continue for some time to come.

Prices broke out of the wedge Dan found yesterday on the September E-mini S&P 500 futures. The channel shown above on the 15-minute bar chart of the cash index was also broken today. There is clear momentum loss manifested in wave patterns (choppy, crossing waves) and a variety of technical indicators with resistance at the 1007 area. All these are bearish indicators. The market will correct at some point and draw prices into the 970s at the least with more substantial drops possible.

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