Sunday, October 10, 2010

Friday 10/8/10 Market Update

According to Thursday's update, higher prices were expected Friday. This is what occurred, however the market may not have completed its top.

Tomorrow is an important day in which prices must move sharply lower almost immediately following the open to support the bearish case. If this does not occur, the market should continue drifting higher for some or all of this week to complete a top.

The apex of the wave (v) wedge now suggested as the first alternate count above (the primary count Friday) has nearly been reached. Prices cannot move beyond this wedge without having completed the pattern. Because the area is so tight and the ii-iv line so steep, the primary count has been changed to a nearly complete wave iii zigzag of ending diagonal wave (v). it will only be after tomorrow's action that the alternate count can be invalidated however.

The new count brings a better form to (v) but it comes at a cost. Wave iii is now longer than wave i which is an unusual feature of an ending diagonal if it is even an allowed one. There is also a strict boundary for (v) at 1176.5 given the length of (i) and (iii) which is not far away.

Given the picture at hand, the short term count is not clear at this time. Regardless of this, please keep in mind that the market is overbought with a choppy upward series of upward drifting waves unfolding. This waning momentum is characteristic of topping activity. Also the probability of a top grows stronger every week as prices continue to rise albeit slowly.

Prices pushed just above the upper Bollinger band Friday. This is also the same story on the weekly chart (not shown).

Following what should soon be a complete wave 2, lower prices are in order.

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