Thursday, October 7, 2010

Thursday 10/7/10 Market Update

In the morning, prices moved to about 1164 before pulling back. A rally beginning mid-day then ensued. In yesterday's update, it was suggested wave iii would complete today below 1166. So today's action including the choppy pullback which is at least part of, probably all of, wave iv fits the larger thesis very well.

The correction today looks complex enough to be wave iv in its entirety and does not look like an impulse lower (making an incomplete wave iii unlikely). In addition the rally into the close has already retraced 61.8% of the day's decline with an impulsive look (looking poised to move higher). It is very unusual for ending diagonals' 2nd or 4th waves to be non-zigzag family patterns.

All these observations make a completing wave v the best count. The small size of iv and probably v are the only issues with this count. Point expectations of the waves however are well in line with expectations. A small rally tomorrow, probably a gap higher, will likely complete wave (v) of [c] of flat wave 2. Given the Fibonacci targets above and here and well as the trend lines shown above, 1165 is the best guess for the termination of wave 2 but higher and lower numbers are also possible. It is probably no coincidence that tomorrow is the jobs report. It will be announced 1 hour before the market opens.

The market is and has been very overbought. Given the choppy characteristics of the recent price action, a top should be coming very soon.

blog comments powered by Disqus