Monday, January 24, 2011

Monday 1/24/11 Market Update

Prices moved higher today again pushing up to the 78.6% retracement level of the decline since 1/18 (now a resistance level established on Friday). There was a pullback, then prices surged ahead again with the futures closing above resistance at 4:15 EST.

Although not invalidated, there is a slim chance that a top has been reached due to the second prod of very high retracement levels of the decline since 1/18. Because of this, the count has been changed as reflected above.

An unfolding ending diagonal since 1/20 seems to be a reasonable assessment. First, wave (i) above is a very corrective pattern due to the sell-off that ensued Friday (wave (ii)). Second, momentum is waning to the upside in the short term. There will likely not be enough energy to give impulsive definition to the rally after any positive gains that follow. A surge higher tomorrow is expected, but prices will likely come back down. Unless the market soars higher, prices will not break higher out of the current base channel (not shown, but its lower line is above).

Finally, an ending diagonal works well in the context of the rally since late November shown in the 30 minute chart above; the market is low on momentum which suggests some sort of pullback soon. Ending diagonals typically terminate the waves that they are contained within which in this case is the impulse since late November.

At least a serious correction should begin after the market finishes its slow rise higher.

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