Thursday 6/25/09-Friday 6/26/09 1m Chart

Today the market continued trading sideways. It broke out of the shallow downward channel and is now in a shallow upward channel. The larger rally has now retraced almost exactly 50% of the decline since the 956.23 top.

The correction today did get us near a 38.2% retracement of the previous impulse. A possibility of two impulse waves can be seen up off of that low today (the first chart). This may be a zigzag or part of some other impulsive structure. Assuming the waves were two impulses, this chart is marked as if we will have more upside because this works best with that count so far. If it is only a zigzag then another count will be needed and it is sure to be a strange one; the zigzag would be part of a double zigzag but it seems very small compared to what the first would need to be. In any case the count on the first chart does not look right nor does a zigzag at the location.

Using the first chart, the market could rally from here completing the (c) of the [y] wave of the double zigzag. The 927 or 930 target discussed yesterday would then still hold. Even if there is no double zigzag, it could be completing an upward impulse of some kind. This is still an off chance because [w] looks very much like two thrusts with a wide arrangement of zigzag waves in between.

Kenny just posted a chart showing an ending diagonal scenario, I agree with this idea completely; it is a 5 and would be the (c) wave of [y]; wave X is then completed. I have posted another chart showing this. The chart solves many problems and looks better on the very small scale, consider wave (5) of [1] on the first chart near the close. Also we have not seen this pattern in some time, that supports its existence. This is my primary count.

With this count the market will sell-off Monday and may gap down. Note also that the triangle apex I mentioned yesterday and earlier (http://natesmarketanalysis.blogspot.com/2009/06/monday-61509-15m-chart.html) lines up almost perfectly with the high around the close. If W really has begun this reinforces the idea that that really was a triangle.

Problems:
Zigzag looking pattern but at the end of a rally.

Alternatives:
Triple zigzag completed but this is a rare pattern. Also the (a) of [y] wave would need to be a zigzag and it looks like a clear impulse.

Zigzag at the close was the second zigzag in a double zigzag.

A 5 wave impulse completing soon, currently in the 5th wave of it. A 1st wave completed Wednesday and we are now in the "3rd of a 3rd" wave of a larger impulse. Any other creative impulsive structure off of 888.86.

In wave 2 of a larger decline. Seems very unlikely at this point considering the zigzag looking structure of W.

Degrees may be off.

Tuesday 6/23/09-Thursday 6/25/09 1m Chart

The market had a strong rally today after bouncing off of the 200 day moving average early in the morning. The zigzag idea off the 956.23 top is the primary count once again; the market needed to break down confirming a 3rd wave but it did not. This count implies that we are sill in primary wave 2 with more upside to come. Volume was lower again today, about the same level as yesterday.

There are various counts for the action shown but this count shows a WXY double zigzag scenario in which the X wave with its own double zigzag is still being completed. Yet another count is shown for Tuesday's structure to come to this. The double zigzag, should it be completed, could be a part of a larger correction (triangle, flat, etc.). The same goes for a single zigzag obviously.

It appears that we finished a 5 wave impulse up and are poised to move higher; the market did not impulse down off the highs today, but gave us a 3 wave correction. Following that it nearly hit another high. This action near the close may be a flat after an impulse down but the retracement was extremely deep and the pattern looks too wide. The pullback did not hit a 38.2% retracement but did cover the territory of the iv wave of (a).

If we get that final impulse, I would expect it to stop right around 927, there is resistance there. Here (c) would be 50% of (a). At 930, there would be a 61.8% retracement from the 956.23 high and [w] would be about 61.8% of [y]. A move beyond these numbers would indicate some other pattern is taking place.

As a reminder we will be crossing a triangle apex tomorrow and I stated earlier (http://natesmarketanalysis.blogspot.com/2009/06/monday-61509-15m-chart.html). It may amount to nothing but is something to consider especially if the waves continue to be confusing as they have been.

Finally I would like to thank all of the viewers who have become followers of my blog!

Problems:
Still hard to make anything out of Tuesday and Wednesday market action. The waves look corrective however with many zigzags at Tuesday's close.

Alternatives:
Many things. A single completed zigzag or flat off of W.

The correction is over and we are starting Y or a "3rd of a 3rd" down tomorrow.

The pullback at the close was a 4th wave in a larger impulse.

The zigzag completed at 888.86 but we are impulsing up off of it. We would have a "3rd of a 3rd" tomorrow.

Tuesday 6/23/09-Wednesday 6/24/09 1m Chart

This is an update to my earlier posting today. A double zigzag [ii] wave is now shown with an impulse sell-off from its top. Thanks Kenny for your great ascending triangle idea! Those waves at yesterday's close are best seen as zigzags.

If we did have a triangle, the market was only in correction (triangles are only allowed near the end of patterns). It is the reason [ii] is marked at the top.

This structure as the count shows is very bearish; tomorrow could be a very weak day with a big gap down. The market continues to operate within the bearish channel since 956.23 as Dan has shown. 872 (projecting the length of [i] down from [ii]) at the least should end [iii] if it does occur. If it is less then we may be completing a corrective wave as one of my alternatives discusses. In any case when a 5 wave impulse structure occurs off of a top, we will see another impulse wave unless the 5 wave count was not correct.

[ii] retraced between 50% to 61.8% of [i] which is normal for second waves. (ii), if it is correct, was a 38.2% retracement of (i).

Problems:
(i) is not very nice looking but the Fed announcement did come out in the middle of the pattern.

It is still difficult to make out yesterday's waves. They do not look impulsive though.

Alternatives:
[ii] is really an 'a' wave and (i) is really a 'b' wave completed or still completing. This would be making a flat or some other correction. This count would probably imply that [i] was actually [c] or C and we are going to complete a double zigzag with some [b] or B wave in between them. The alternative is a wide [i] wave but that is not likely. (i) could turn into double zigzag if it is not one already.

We will be completing a rare triple zigzag with the 3rd zigzag starting today.

The degree labellings may be off.

Tuesday 6/23/09-Wednesday 6/24/09 1m Intraday Chart

The market is impulsing today and is looking more bullish than bearish; the (c) or (iii) wave is more extended than the (a) or (i) wave (about 2 times as long). The count shown looks more as if [c] bottomed but the market could still go either way.

We moved through the 50% retracement level of the [i] or [c] wave.

Monday 6/22/09-Tuesday 6/23/09 1m Chart

Today was a very difficult day to analyze waves but we did bottom in the 880s as I expected. From what I can see we did finish the 5th wave talked about yesterday (now labeled (v)), it bounced off the top set of my targets. Then for the remainder of the day there was a sideways movement of corrective nature telling us that we are not only in wave 3 but this wave is not yet complete. An impulsive wave structure needed to take place to prove that we reached some sort of bottom. This did not take place so there will probably be a very bearish market ahead of us, at least for the short term. The is likely because the "point of recognition" or "3rd of a 3rd" wave is ahead of us.

On a bullish note the market is still in an oversold condition but these indicators can ride on the floor for a long period of time; the market does not have to rebound when it is in an oversold condition. There are also resistance levels coming but again with enough people behind any side of the market, it can go anywhere. Also we may have had the golden cross today in which the 50 and 200 days moving averages crossed. But again the market is not required to do anything and these are lagging indicators. It is an important psychological point though.

The labels were changed by one degree and may need to be changed again if this truly is primary wave 3. This could turn into some other correction of primary wave 2 such as a double zigzag or a larger zigzag not yet completed. More market information will tell us this.

The whole correction is looking the same as the last few we have seen off the top; complex and hard to read! I spent a large part of the day trying to interpret the sideways market action. It was difficult because some waves look to be either 3-wave or 5-wave structures; even worse some look like 3-wave or 5-wave structures only to have a paradox tell you it is just the opposite. I tried various counts but ran into many dead ends. The best looking count is shown above.

One thing that is clear to me is that this is not one large triangle but does contain a triangle somewhere within it given the overlap and small zigzags. Another option is an expanding triangle (y) wave in development. However this does not look as nice and is rare so it is not my primary count.

Wave (v) was very sloppy and its count is also up for grabs.

Problems:
Some wave look more like 3-wave structures yet are impulsive, at least in my count.

Some look more like 5-wave structures yet are 3-wave structures, at least in my count.

The (v) wave looks sloppy and there is not much wedging.

Alternatives:
An expanding triangle (y) wave not yet finished.

This sideways action is actually an impulse with a wide correction.

(v) was actually a leading diagonal (3-3-3-3-3?) and we retraced it nicely today, about 78.6%, a target.

This wide correction is actually part of (iv) not yet completed. That would seem very wide however.

Friday 6/19/09-Monday 6/22/09 1m Chart

The market gaped down confirming the count (the labeling degree was changed but the count remains the same). We appear to be completing wave [v] from the recent correction top. The structure off of this correction has not been as dramatic as the wave off the 956.23 highs thus it appears that this is a C wave, not wave 3. This implies that primary wave 2 is not over and will continue for some time to come.

In addition this market is looking too oversold to really be starting primary wave 3. We are also encountering some resistance around 880s so that should provide a bottom. If it does, then this is a good sign that this was only a correction.

Some approximate targets are shown for the end of [v] and C; white is the length of A (100%, not shown, extends to ~874.72), green is the length of [iii], blue is the length of [i], and purple is the length of [i] through [iii]. A channel is also drawn.

Something to start thinking about is the possible larger structure that C is a part of, e.g. a triangle, flat, double zigzag, etc. We should bottom tomorrow and start to bounce but how high it takes us in not known.

Problems:
[iv] was a sharp correction just as [ii] was; there is no alternation.

Alternatives:
Wave [iv] is not over.

The end of [v] is actually [i], just part of a larger 3rd wave.

This is the 3rd wave, and 5 will be smaller than 3.

Again the labellings could be too large by one degree, perhaps only [c] is being completed, not C.

There was an ending diagonal wave [v] at the close or a leading diagonal for a first wave. However the ending diagonal looks too small in comparison to the other waves. It looks more like a setup for a gap down tomorrow. Then again wave [v] is 61.8% of wave [i] at the close.