Thursday, October 14, 2010

Thursday 10/14/10 Market Update

The alternate count presented in yesterday's update is now the primary count. This change was made due to the overlapping waves seen today and in many ways actually works better with its sub waves.

The overall picture of a large advance still underway remains sound. The Dow 30 is only about 100 points from making a new recovery high and the S&P 500 is above the 78.6% retracement level of the decline. Prices should reach a new high, or at least double top to complete the advance since March 2009.

A zigzag higher since 8/31 is likely the best view at this time, but the waves are not clear. An impulse higher (wave A) followed by a sideways correction (wave B) may be setting the stage for an ending diagonal advance higher (wave C). An ending diagonal wave is the desired option given the zigzag-natured and overlapping advance. It also works well as the final wave of such a large advance.

If wave [iii] is actually underway, tomorrow may be a large up day with good breadth. 1218 should this wave's limit.

Wave [ii] has retraced little of wave [i] but does not count well as an impulse. Wave [ii] should not be a sideways correction (where the decline could be wave (a) of [ii]), so the best bet is a rally tomorrow. The market is in a position to gap higher.

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