Sunday, February 14, 2010

Friday 2/12/10 Market Update

Prices opened lower Friday morning but another bounce followed. So far this rally is forming a wedge composed of zigzag legs, the characteristics of an ending diagonal.

A 1 minute chart is above. The rally on Friday should have been most of wave [C] of y of (ii) of [iii], the final leg of (ii). y is likely a flat or a zigzag. Since [A] of y counts well as a 5 and second waves are typically zigzag family patterns, the count shown is one of a double zigzag wave (ii). [C] of y is a 5 for either of these options so for trading purposes, it does not matter what y is. There is a chance y is a completing triangle, but this is not likely.

If an ending diagonal is unfolding, expect a sharp sell-off upon its completion. [C] may be truncated as well which will only add extra energy to the ensuing decline.

Above is a 5 minute chart of the NASDAQ. There is clear wedging here with negative divergence on the RSI and MACD indicators. Just like in the S&P 500, there may be another small burst remaining in the NASDAQ.

As the above chart shows, (ii) has been quite wide. But there are still a series of choppy waves that have retraced less than 61.8% of (i) so the picture has changed very little since Thursday. If this count is incorrect, wave [ii] may be completing. This option is a bit questionable however since there is no positive MACD divergence.

The technical studies discussed Thursday still apply; two updated charts are above.

There is no trading tomorrow because of the Presidents' Day holiday. The next post will be Tuesday.

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