Tuesday, May 25, 2010

Tuesday 5/25/10 Market Update

The S&P 500 was down nearly 33 points today before rallying all the way back and closing positive for the day. The market action today fits well with the count illustrated in yesterday's update. That count has been updated but has not changed. A 1 minute chart can be seen above.

A gap higher is possible tomorrow, but notice the divergence on the 1 minute RSI. It looks like wave iii is winding down. This marked wave iii may be part of impulse wave (a) of zigzag wave [ii]. A more complex correction is possible, but the most simplistic count is assumed.

Expect wave [ii] to rally back to the 50% retracement level (2nd waves typically retrace most of the preceding 1st wave). The 1110-1120 area looks like a good target. If the rally extends beyond 1120, there is a good chance the count is incorrect.

The larger view remains unchanged.

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