Wednesday, October 28, 2009

Wednesday 10/28/09 Market Update

The market moved lower again today. In the short term, this market is now very oversold so expect at least a correction very soon. The strength of this price recovery will help us determine wave counts on an intermediate scale. At the moment, there are still many options.

Above is a daily bar chart on a linear scale. Notice the broken trend line with prices now below the 61.8% retracement point of the previous impulse wave. I presented this same chart on log scale a few days ago with an idea of the wave count up to that point. Because of the magnitude of the recent decline, this count is not as probable as before. Perhaps a different pattern is unfolding. Because there are no clear counts beyond the (X) wave shown, I believe wave [2] is incomplete. A large ending diagonal still forming is a possibility.

Using short term waves, an argument can be made for a wave [2] top, but how that occurred is not at all clear on a larger scale. Even consider this chart from Kenny. It is a bearish count, but it is difficult at best to make out 5 waves up since 10/02. A flat wave occurring 10/19-10/22 comes much more naturally. It fits well with the corrective waves Kenny also presented today on this chart. This is the structure that I favor. How it fits into the larger picture is still very much up for debate.

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