Monday, November 2, 2009

Monday 11/2/09 Market Update

The market rallied early today. Then in an impulsive fashion, prices came crashing back down breaking below 1030 on the S&P 500, a level below Monday's low. Another rally followed and the market closed higher for the day.

As mentioned yesterday, this sell-off is running out of steam in the short term. A wave [ii] rally should begin soon if it has not already started. This will probably be a zigzag pattern which is typical for second waves, especially those following leading diagonals, such as the possible one shown in the 10 minute bar chart of the Dow above. This is not a nice looking chart but seems to be the best at the moment. If it is wrong, there may be more downside ahead, but probably not with much momentum.

Waves are also unclear on the S&P 500. A 5 minute chart of the S&P 500 is shown above. A nice channel has formed and prices may have bottomed. It would be a satisfying technical bottom, but not a satisfying bottom from an Elliott perspective. The wave count Kenny and Dan have presented in the past is probably correct.

The Dow Jones Transportation Average prices are also contained in a channel as shown in the above 30 minute bar chart. Watch for prices to move above their upper channel lines on all these indices. This should indicate a change in direction in the short term. But on a larger scale, it appears that primary wave [2] has topped. Again, it is not the most satisfying wave count, but seems the most probable given the extent of this decline seen the past week or two.

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