Sunday, March 21, 2010

Friday 3/19/10 Market Update

With no changes to the existing larger count, wave (iii) appears to have completed Friday. An impulse lower followed before generally sideways price action ensued. There are a number of ways to interpret the waves following the decline, see the chart above. Because the correction looks sideways and has not retraced much of the impulse lower, the best assessment is that a zigzag family correction lower is unfolding (or has unfolded). Because of the size of (ii) and (iii), it seems that this zigzag correction is just the first wave of subminuette degree within (iv). See the chart below.

Wave (iv) can take on many forms, but we do have a few guidelines to follow. Prices within wave (iv) should continue at least until the channel shown is reached. In addition, wave iv of (iii) territory will probably be reached during this correction. If however prices break higher beyond the top of (iii), I would expect that rally to be wave b or x wave within (iv). A collapse lower may be the beginning of a larger decline lower if the bottom alternate count above is correct. A sharp wave (iv) zigzag lower is also possible however.

For now, the low 1040s should provide support for wave (iv) but there is nothing saying prices will reach this level. Another brief sell-off tomorrow may complete a of (iv) without even reaching to 1040s. So far the decline Friday has been wider than the widest part of the wave iv of (iii) triangle. So if (iv) is an unfolding triangle, it makes sense that wave a of (iv) need not reach the low 1040s.

Currently the E-mini S&P 500 Futures are trading below the lowest point achieved Friday. As has been identified previously in this blog, when the S&P 500 rallies significantly to the close and prices gap down substantially the following day, this is an indication that the market is correcting lower. So a gap down tomorrow may be wave [C] of a of (iv). Note however that a correcting wave need not complete after a gaping wave lower. For example a decline tomorrow can also be wave (C) of [W] of a of (iv). A small gap down may be a wave within [B] of a of (iv).

The above count still appears to be a reasonable option.

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