Monday, March 1, 2010

Monday 3/1/10 Market Update

The count suggested yesterday (and shown in the chart above) remains valid. In case this count is incorrect, a few different sets of labellings are suggested above as alternates.

A detailed view of the recent price action is illustrated in the chart above with some possible labellings. Prices moved higher today, beyond the previous wave 2 high. Because of this, the bottom alternate in the 30 minute chart above becomes much more valid. However due to the placement of the "3rd of a 3rd" wave the past three trading days, this is only a possibility if there is a 5th wave extension unfolding. In my opinion, a 5th wave extension of this size (already longer than what appear to be the previous 1st and 3rd waves combined) is what qualifies this count as an alternate. The same holds true for an impulse wave (a) of [y] of 2. It is unlikely the market will surge higher in a larger "3rd of a 3rd" without a significant pullback.

So if the rally the past three trading days has shown zigzag characteristics, it has been part of wave (b) of flat wave [x] of 2 or wave [y] of 2. The [y] of 2 count is highlighted in the 1 minute chart above. It is questionable as it contains a small looking (b) wave, far smaller than triangle wave (b) of [w] of 2. The wave (b) of flat wave [x] of 2 count is probably worse as it would cause wave 2 to become even more widened. Also 'x' waves are usually zigzag patterns.

Whether or not an impulse or a zigzag began 2/25, it looks like there will be one more push higher following the completion of the sideways corrective looking waves that began in the late morning hours today (the labeled wave iv triangle may not be complete or correct). 5th wave extensions are usually retraced swiftly so if prices break down hard following the top, it may only be another correction before another push higher, not necessarily the beginning of wave 3.

Some indices (the Russell 2000 and Dow Jones Transportation Average for instance) look destined to break through their January highs. This still does not appear to be the case in the S&P 500 and Dow Jones Industrial Average. This non-confirmation would be another bearish indicator. If the S&P 500 and Dow continue to show strength this week, more bullish counts will be discussed.

One final chart is above.

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