Thursday, October 28, 2010

Thursday 10/28/10 Market Update

The futures are showing signs of weakness with the lows of the day being tested. If prices rebound to open near today's closing level, the alternate count (a complete wave [iv]) will be more desirable, but not necessarily the primary unless there is a open above 1185; a substantial gap higher works best the the alternate count.

For now the expectation is a gap lower with perhaps a point or two of follow through. Note that this will give good subdivision alternation between the impulse waves in (w) and (y) (a waves subdivided, c waves not). The b waves will then also be alternating. This should complete wave c of (y) of [iv] with a target around 1173-74.

The 1173-74 area is not only the zone where c equals a and (y) is 61.8% of (w), it is also the location where there will be 61.8% retracement of [iii]. There is also resistance in this area. A break of Wednesday's low is not expected. There is not (y) truncation unless 1177.72 holds.

Moving under the indicated line in the above chart will invalidate the ending diagonal wave C count since there will no longer be wedging. It may seem hard to believe an ending diagonal can be this "flat", but this is precisely what happened in the ending diagonal last December/January. Please keep in mind that the downward action this week looks very corrective. The same goes for the rally since 10/4.

Should all go as planned tomorrow, the completion of C should occur the next week or two.

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