Tuesday, January 12, 2010

Tuesday 1/12/10 Market Update

There was weakness in the market today. The gap down may have been the "3rd of a 3rd" wave of a larger impulse down on the S&P 500. It is very possible to find impulsive labellings as has been done in the above 1 minute chart. A corrective alternate is shown above as well but it looks quite bad.

The above 15 minute chart shows what a completed C wave may look like. Ending diagonal (c) of [v] was almost completely retraced today before prices bounced upon reaching the lower channel line. I think it is the best overall count/idea at the moment and works well with an impulse lower since yesterday. There are problems however. For one thing, the 3rd waves of the ending diagonals are longer than their 1st wave counterparts.

The Dow Jones Industrial Average on the other hand does not seem to violate any guidelines. It is a clean pattern and shows very clear wedging characteristics. Because of the downward zigzag looking wave since the peak yesterday, another new high should be ahead. Due to the complexity of what appears to be wave [iii] of C, [v] appears to be underway. The Mini Dow Jones Industrial Average Futures are showing strength in after hours so this idea is making sense.

Given the after hours strength and bullish short term picture for the Dow Jones Industrial Average, it brings further doubt to the S&P 500 C wave count. I think tomorrow will be a bullish day which may or may not lead to another new high on the S&P 500. The gap down today is very close to the top and it is a target the may be filled. If this occurs perhaps a double zigzag [v] of C wave will complete following a final S&P 500 high. The C wave count is hardly changed in that case. This is not out of the question and probably makes more sense than a big retracement following a completed ending diagonal C wave.

The path of least resistance was clearly down today, but it is odd that the futures are showing such strength if the market really has turned. Also the waves lower since the peak today were not as clean as I was expecting. I think they should be when following an ending diagonal. No rules have been broken, but these are things to think about.

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