Tuesday, March 2, 2010

Tuesday 3/2/10 Market Update

The wave count has changed very little since yesterday. The completion of wave 2 is the primary count and is illustrated in the 1 minute chart above. If this is correct, the retracement of extended wave v of (c) of [y] should continue tomorrow in the morning hours.

There are problems with this count, but in my estimation the rally since 2/25 is a questionable looking impulse. It is possible, but the location of what would be the 3rd wave concerns me. Impulse waves tend to be symmetrical with their 3rd waves showing the greatest momentum. In order to describe this rally as an impulse, one of these needs to be sacrificed (the result would be an extended 5th wave or a weak 3rd wave). This does not make it impossible however. If the rally since 2/25 has been an impulse, two counts in the alternate list above apply. The exact count of an impulse since 2/25 is debatable.

The chart above shows the extensive size of wave 2 up to this point. This does not break any rules, but a continuation of the rally will greatly challenge the larger count. Today the Russell 2000 hit new high while the Dow Jones Transportation Average and NASDAQ have now retraced more than 78.6% of the previous decline. It is possible the Dow Jones Industrial Average and S&P 500 hit new highs, but the rally since 2/5 does not resemble an impulse. In addition, the larger count shown in the chart below, with a more complete view here, is very difficult at best to reformulate. If some markets hit new highs while others do not, this is actually a bearish sign for stocks in general.

The count remains the same for the S&P 500. This seems to be well justified from not only an Elliott Wave perspective, but from other perspectives (momentum, volume, risk taking, etc.).

One final chart is above. Note the bearish looking candle today.

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