Monday, October 11, 2010

Monday 10/11/10 Market Update

After an uneventful day of trading, the count expressed in Friday's Update has not changed. The short term upward structure is not clear at this time, but the view is a completing wave iv of ending diagonal wave (v) but by a slim margin. This implies lower prices tomorrow which should reach the middle 1150s. If there is a continuation below 1150, this is a warning sign that the sell-off is underway. At the same time, a gap lower tomorrow is likely a corrective move that should be filled.

The count is not clear, but a completing ending diagonal is likely. A complete ending diagonal wave (v) is probably the best alternate count but not without noticeable problems. The rally since 10/7 looks more like an impulse than a zigzag with the lower ii-iv line very steep. Given this, there is not much room for a final move higher to complete a more well formed zigzag. In fact, the Dow 30 has already moved beyond its diagonal's apex ruling out an incomplete upward zigzag for this index (however a complete ending diagonal is still an option because it came before the apex). Wave (v) still may be complete as an ending diagonal with v a complex zigzag correction, however prices are simply not breaking down. This can change quickly though given the high probability of an ending diagonal wave (v).

Within wave (v), wave iii is now longer than wave i which is a broken guideline of ending diagonals but not a broken rule. The form of the advance is still well suited for a completing ending diagonal.

Note that the alternate count with complete ending diagonal wave (v) does not break this guideline.

There will eventually be lower prices following the current upswing. This should take prices below 1000.

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