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Saturday, January 23, 2010

Check-In With Damien
By Ilene at Phil’s Stock World
This week, Damien Hoffman founder of Wall St. Cheat Sheet talks with me about the stock market, the economy, politics, corporations, and about his plans and aspirations. Hope you enjoy our interview as much as I did. Click here to read the article
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Week-end outlook!!!

This is the SPX, and I went through looking for areas of support and spots that a reversal might happen, and I purposely did it without any Elliott wave influence, just to see what traditional Technical analysis would give up.
I found some very heavy areas of support between 1083.75-1085.89 caused by a series of important lows made over a period of about one month, down below that if it does not hold the price action up there, is an open gap at around 1070, that creates gap support, another area that reversals happen. Gaps are wonderful calling cards, and in scenarios like this with the price action heading in their direction often will get filled, right before a reversal.

And the last major support on the chart, is at 1029.38, a low made back on November 2nd, and from a wave one degree higher then the lows set up at 1085, this a very important level to hold for the bulls.

I then set up the Fibonacci retracement levels using the high of 1050.45, and the low of 869.32 as my extremes, and the first level down for that is the 38.2% common retracement level at 1043.06, ouch, the bulls are in trouble if that does not hold.

And lastly I put on a set of Fibonacci fans, where you can combine the price and times of common Fib levels. I did a post all about Fib fans last week-end and you can find it here, Fibonacci Fans.

With all of that, I have found three areas where a reversal might happen as shown by the red dash lines, the only thing to add is on this 60 minute chart, there are no divergences developing yet on the indicators. We normally see negative divergences before a trend change takes place, they are one of the first warning signals that the price action is showing signs of weakness and show up as the index keeps making lower lows, the indicators will start making higher lows at the same time, a big red flag to watch for.

This is what I have for the Elliott wave count, a series of 1-2's, with no confirmed signs of a finished 3rd wave. For speculation purposes, I set the count up, as if we have just completed the first (and the smallest degree) 3rd wave (iii) at 1090.18, the low on Friday so I could try and get some idea where the over-all wave (1?) could finish up.

I was amazed after I set the 50% Fib retracement level right in the middle of the smallest degree 3rd wave to see where the 38.2% and 61.8% levels ended up, encasing the whole 3rd wave (iii). The idea of setting that they way I did was that the middle of the 3rd, should measure out to one-half of the length of the whole completed wave, in a perfect world of course, but it does give some guidance that is helpful in the long run.

The conclusion, is that ending at 1055.10, would make the perfect size wave, if there where no extended or truncated waves along the way to mess things up. So combining what I found in the first chart, with what I have going in the Elliott wave count, I am looking for a reversal down around 1045-1060, by using the support of the Fib fan, the Fib retracement levels of both charts, and the Elliott wave theory to base it on.

Warning!!!

We currently have seven completed waves, and that number counts out as a correction, that is, the sell-off as of now can be counted as an a-b-c-x-a-b-c, a double zig-zag, I do not really see that possibility in the cards, but if the price breaks above 1104.94, the 1-2 down count on the chart will be VOIDED, because a 4th wave can not enter the price territory of the corresponding 1st wave, and if that were to happen the count is wrong, FWIW, 1104.94, is currently where I have my stops on my shorts placed.

1 comment:

  1. Hi! What a great site you've got going here! Congrats. I just started a blog myself, and have some fib confluence charts posted there showing support levels for the RUT, NDX, and SPX. I am in agreement with levels you have identified as important, as well as with your count.
    If your interested, my site is called Fibs And Waves at http://blankfiendsew.blogspot.com/
    If you don't mind, I'll add your site to my bloglist.

    ReplyDelete