Thursday, December 10, 2009

Thursday 12/10/09 Market Update

The market gaped higher today then traded sideways for the remainder of the day. What looked like a clear zigzag from the lows yesterday is probably not one. The rally today does not look like the completion of a second zigzag and the sideways waves following have the characteristics of a sideways correction. Proportionality between waves is not a requirement, but the market tends towards a balance.

In a 1 minute chart of the S&P 500 above, a count is proposed that has the market making a B wave bottom yesterday. Other impulsive counts are valid. The very small waves are pretty much guesses and they will be resolved after a clearer structure is painted by the market. But given the larger picture, these labellings seem to be the most probable.

As the 15 minute chart above illustrates, the count proposed Tuesday may in fact have been correct all along, although it was not until Wednesday that the structure completed. Waves breaking out of the channel since 12/4 give us a good indication that another wave has begun. Looking at the overall structure, Wednesday 12/9 seems to be a good place for a bottom of the B wave. The correction has been dragging on in a tight range for a surprisingly long amount of time.

A move below 1095 before another advance is a strong indicator that B is still unfolding. But for now I expect the market to continue advancing higher in what may be a fairly strong C wave now that there is a nice base in place. This will be wave C of (Z) of [2], the final impulse of minor degree we see within wave [2] if the larger count is correct. See the daily chart below for a view of the longer term count.

Have a nice weekend. The next post will be Sunday.

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