Tuesday, September 7, 2010

Tuesday 9/7/10 Market Update

In Friday's update, it was shown here that an upward triangle wave [x] of 2 may be unfolding. While this is still possible, today's action leads me to believe wave [iii] of 3 lower is in its initial stages. This is not a high probability however.

The chart above suggests a corrective labeling of the recent advance. This advance has a number of characteristics and is difficult to count impulsively. It can then clearly be labeled as wave (d) of triangle wave [x], however it leaves (d) a small wave and not well proportioned with the preceding triangle waves. There is then a lack of symmetry in the triangle (1115 was suggested as an upside target for (d)) if (d) completed Friday.

It is possible that there is a move higher to 1115 or so in the next few days to add proportionality to wave [x]. Given the size of today's decline proportionality, it appears that this will likely be c of (d) making the high after wave b of (d) completes. This view uses the impulsive alternate count above. Note that this count is a bit of a stretch lessening the probability of a final run higher.

The idea that b of (d) is incomplete is supported by the fact that the waves lower today have an impulsive characteristics to them. In other words, the decline that began today looks incomplete.

The count for a completing wave [x] triangle is not a high probability at this time for the reasons expressed above. The complexity of an unusual wave 2 double is also a concern.

The view at this time is a gradual change in momentum back to the downside. Tomorrow prices should continue lower with perhaps a small gap down leading the way. There should be a series of strong second wave bounces after each move lower before the real selling begins. If wave [iii] of 3 is underway, 1000 should be broken easily later this month. At that point, there is a good chance the large head and shoulders above is confirmed at far lower levels.

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