Tuesday, July 6, 2010

Tuesday 7/6/10 Market Update

There was a gap higher today that was fully retraced later in the day. The deep retracement of the rally since Friday is not a bullish sign in the short term. Rather a complete upward zigzag correction, wave iv of (iii) of [i] of 3, looks complete at today's high.

The wave count following today's peak is not clear, but a completing impulse wave lower, wave v, seems probable. A 1 minute chart is above. A second wave bounce higher, wave [2], may be unfolding now. Please note that with some uncertainty to the 1-2 wave labellings leading the move lower since 6/21, the blue targets shown for v in the first chart may not be correct. A sharp second wave short-covering bounce is coming. Since it appears that an impulse is winding down since 6/21, this bounce can occur after the next move lower (meaning an alternate count in the first chart is used). This sharp move should retrace more than 50% of the decline 6/21.

The channel displayed in Friday's update on this scale was broken to the upside. However as mentioned Friday, 4th waves often break out of channels lessening the slope of the entire trend. If prices continue past the 61.8% retracement level displayed in the 1 minute chart above (the second chart), this should be an indication that a larger corrective bounce is underway.

The larger view has not changed.

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