Thursday, February 11, 2010

Thursday 2/11/10 Market Update

The triangle shown yesterday appears to have completed today. This low set the stage for what looks to be an impulsive c of (ii) wave rally that took prices to 1080. The first leg of (ii) can be labeled as wave a so there is no problem here. This was suggested in yesterday's 1 minute chart. [5] of c should complete tomorrow morning but may have already done so if the alternate in the above 1 minute chart is correct.

As some of you know, Elliott Wave International released an emergency update today highlighting the b wave triangle. Not only was this option suggested yesterday on this blog before it completed, but it was my primary count.

On a different note, there has been quite a bit of concern recently regarding the extensive width of wave (ii). There is no rule against wide corrections but it is not common. Corrections like this can be found with a little work. Some recent examples are circled above. A larger example in late July 2009, wave (ii) of [v] of A of (Y) of [2], can be seen here with a greater detail here. Wave (iv) was also quite wide.

So the below chart outlining wave (ii) does not look like a problem at all. Remember not even 61.8% of (i) has been retraced.

Some technical studies are shown in the remaining two charts.

The moving averages above have contracted forming almost a single line. This means they will begin expanding. Also note the MACD and Signal lines are approaching the zero line. If the MACD line or signal line reverses near 0, this is a bearish setup.

A MACD hook (the signal line attempting to penetrate the MACD line), is a warning that the larger trend may be ready to resume. So far the signal line has not turned lower but may do so soon.

In a final note, a new moon is due 2/14/10 which usually corresponds to the general area when stocks make a top. This is highlighted here in a chart from Cobra. His blog is available here.

The last two charts tell us the market is sitting at an inflection point. Given the choppiness of the rally and the Elliott wave pattern behind it, I believe this is a bearish setup in which the above patterns will be confirmed. If they are not confirmed, I will begin to question this entire down leg.

The next post will be Sunday.

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