Thursday, December 17, 2009

Thursday 12/17/09 Market Update

Stocks traded lower today in what appears to be a continued wave (c) of a wave [ii] flat. A iv of (c) wave triangle may have formed for the majority of today's trading but an alternative is shown below. This is not a nice looking expanding flat, but it does not break any rules.

Notice the typical 61.8% retracement of wave [i]. I would expect the mid to low 1090s to provide support. It is possible [ii] bottomed at the close (or possibly around 1:00pm EST however the Dow Jones Industrial Average made a new low at the close). If there is a gap higher tomorrow morning, it should be wave [C] of a iv wave flat. A gap down should be wave (3) of [3] of v. There are a surprisingly large number of ways to interpret the price structure today so we will have to wait and see what happens.

If a flat is not unfolding, a zigzag (w) of [e] of B wave triangle down may have occurred since the peak yesterday as the 10 minute chart below suggests (but does not illustrate).

1085.89 cannot be crossed if this is playing out, which is the same situation for a bottoming [ii] of C wave. It is not easy to make out a well formed 12/9-12/16 zigzag [d] wave however and B is already quite wide. A flat [a] wave of B would also be unusual. The action at the top earlier this week looks more like that of the first part of a flat to me. In any case, I am confident that prices will eventually break out of this sideways pattern with a new high eventually being reached.

A double flat is also possible. If this unfolds, 1085 should be broken slightly to the downside. Other possibilities exist.

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