Tuesday, February 16, 2010

Tuesday 2/16/10 Market Update

There was a substantial rally today but on less than impressive volume (not shown). Volume has been waning since the rally began 2/5 which is a bearish sign.

The chart above shows a new view of the decline since 1/19 as was suggested as an alternate in previous posts. The 2/2 peak has not been crossed, but more than 78.6% of the decline that followed has been retraced. In addition other indices have crossed this point so it appears that wave [ii] is underway. The rally is still best described as a single zigzag ((a)(b)(c)) or a double zigzag ((w)(x)(y)) but is larger than originally anticipated. The technical studies discussed the previous two days will suit us better when the size of the new trend is clear.

It is a bit odd to label the sell-off as a single 5-wave decline. Waves are more out of proportion and there is no MACD divergence between waves (iii) and (v) (more apparent on a 15 minute or 30 minute chart). I also would have expected a more rapid advance following extended wave (v). But given the choppiness of the advancement and the larger overall count of the market (that this is primary wave [3] following triple zigzag wave [2]), it seems safe to assume that this is just a rally with limited upside. Because of the sideways series of zigzag waves last week, it is very difficult to find a reasonable impulsive count from the 2/5 lows; the second wave would extremely wide and quite bizarre.

A 1 minute chart is above. Today's labellings are not certain, but assuming the rally has not completed, a pullback should begin sometime tomorrow if it has not already done so at the close today. This would be wave iv of (c) of [ii] if [ii] is a single zigzag and probably the beginning of [iii] if [ii] is a double zigzag. Both a single and double zigzag are valid options for [ii], however since second waves usually retrace more than half of the previous 1st wave of same degree and this has not yet happened, a single zigzag may be the best option. Given the strength of the rally today, a single zigzag is my primary count.

There was a new moon a few days ago, an event that normally occurs near the time stocks top. This has been a reliable cycle the past few months. Let's see if this trend continues.

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