Sunday, August 22, 2010

Friday 8/20/10 Market Update

As described in Thursday's Update, the market is likely still declining within a 3rd wave lower.

In the shorter term, it appears that a running flat wave ii of (iii) may be nearly complete. The decline on Friday resembles a zigzag while the rally following it charts best as a completing impulse wave. Because the 3rd wave of this impulse looks complete and prices are still far from the 1080 level where [A] of ii terminated, there is justification for the running flat idea. There can also be a 5th wave (wave (5) of [C] of ii) blow-off tomorrow morning that reaches the 1080 area. Less likely in my opinion is a "3rd of a 3rd" gap higher tomorrow.

A running flat is a sign of weakness. Prices also look destined to decline again in a "3rd of a 3rd" wave lower within waves still retracing an ending diagonal. These are all very bearish signs for stocks.

The larger view is still calling for an eventual break of 1110.

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