Monday, February 22, 2010

Monday 2/22/10 Market Update

Wave iv of (c) of [ii] appears to be a flat nearing completion which implies that wave v is still ahead. The next best count is a wave [ii] top that completed Friday.

A 1 minute chart is above. The waves just before and following the 2/16 gap have been relabeled. There is essentially no room for any more 4th waves to unfold.

With perhaps the exception of the subminiscule waves above, every set of 2nd and 4th waves alternate between sideways and sharp corrections and show satisfying proportionality. Most importantly, wave ii was a zigzag and wave iv looks like a flat that will be completing tomorrow if it has not already done so today. A closer view of recent price action is shown in the 1 minute chart below. They look like corrective waves although they can be counted impulsively.

In addition to the alternation, the overbought technical picture (bad internals with each consecutive move higher, technical indicators overbought or negatively diverging) supports the idea that an impulse wave is completing very soon. Because of the triangle seen 2/8-2/11, this impulse is likely the end of wave (c) of corrective wave [ii]. I say "likely" because there is a chance that there was not a triangle; 2nd wave triangles basically do not exist.

Assuming that v has not completed, the sideways prices today have actually resulted a better overall appearance to wave (c); waves i through iv show better subdivisions and (c) counts more "naturally". See the chart below.

Volume was very weak today (see here for the S&P 500 and here for the Down Jones Industrial Average). It has been waning since the rally began 2/5 and is an indicator that this is a counter-trend move. It looks like wave v may be ahead, but it should not move beyond the pink levels above. Wave [ii] may complete tomorrow. If prices collapse early in the day then clearly [ii] already completed.

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