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Wednesday, April 14, 2010

Wednesday updates

This is another reason I think we still have a ways to go on the upside, the price action is still contained in the most bullish part of the short-term Fib fan (the neon green), and the resistance from the red trendline that goes all the way back to the high of January '09 looks to have be broken to the upside, only being stopped by the resistance of the gray mid-term Fib fan. If the price action stays between the two Fib fans, it could work it way up towards the numbers I listed below, before it breaks either.
This chart is real worrisome for the bear in me, the RSI is very close, if it has not already, to making its highest reading for the entire rally from 666. Seeing the RSI at its peak is not a good short-term sign for the bears, as the negative divergence no longer exists. This reading is telling me that the strength of this rally has not yet peaked. The only hope I have is the the RSI is not as useful in corrective waves, as it is during impulsive waves, where the main strength lays in the middle, or the iii of 3 waves. In corrective waves, the main strength normally is in the "C" wave, but with this corrective wave who knows. And before you comment on the count, let me repeat this, I have no prefered longer term count. This whole wave structure from the lows last year is a jumbo mess of corrective waves that can be counted multiple ways and the odds do not favor anybody knowing the correct count until it is over, and even then I imagine there will still be more then one way to count it, so for now I have decided to take it one wave at a time until the longer term counts become clearer.

After the close, Well, Up, Up, and away was the theme today, the trend does remain up, and now I am seeing the possibility of higher highs still to come. The Ending Diagonal is still valid, but with the Russell invalidating that option and the increase in breadth today and some things I will get into later, I have changed the short-term 1-2, 1-2 of the 5th to my prefered count now, even though the ED is still valid until 1212.89, the odds are not favoring that option.
Breadth for the day was 3.70:1, advancers, on heavy volume, this is the highest reading in more then a month, and IMHO, is short-term bullish, and fits the iii of 3 count for the 5th wave much better then the 5 of the 5th ED option.
Levels to watch for a trend change still remain the same as I posted earlier today, 1196.86, and 1188.82. Instead of trying to anticipate the top to go short, I would rather wait for a confirmation that a top was in. 1196.86 would, for now, be the first sign that we are making lower lows, and I would start a short position, and at 1188.82 I would go full short. These levels are likely to change as (if) we go higher. Until we start making lower lows, I see no point in going short.
The upside targets I am watching now are 1228.74, which is the 61.8% retracement from the top back in '07. 1230.27, which comes from measuring the distance from the start of the 5th wave to the gap today, which normally occurs in the middle of the iii of 3 wave, and doubling that, to give an approximation for the total length of the 5th wave. And finally, taking the length of the 1st wave from 1044.50, to find the length of the 5th. and if they end up being of equal length the 5th would end at 1235.03.
One thing people need to be aware of is OPEX Friday, and some strange things have happened in the last few months around this day, most notable, the following Monday's have typically been BIG movement days.
11:41, The Ending Diagonal on the Russell has been invalidated, once the 5th wave become longer then the 3rd, and the rule of a contracting variety was broken, wave 5, can not be larger then the 3rd wave, and wave 1 must be the longest. That leaves only one option now, the 1-2, 1-2 up, of the 5th wave. The SPX still is valid on the ED count, but with the Russell breaking higher, the odds of that happening on the SPX have dramatically diminished, leaving the 1-2, 1-2 up, as the most likely count. More after the close :)

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8:29, Well we are down to two options on the short-term counts now. The Ending Diagonal, or the more bullish 1-2, 1-2, of the 5th up. The gap up open fits both of them, unfortunately, the gap could be an Exhaustion gap for the ED signaling the end, or a Continuation gap for the third wave of the 1-2, 1-2 up, the point of recognition. And the throw-over of the channel supports the ED as that is very common, and expected in the final wave of the ED.
For now the trend does remain up as a new high was made this morning. At this point breaking below the low of 1199.86 would be the first sign that something is up, and that most likely would not be of the bullish variety, and would not fit in on either count unless a top was put in before hand. A break below 1188.82 would definitely confirm the short-term trend has changed to down.

Click here for a live, and updated chart!!!
7:39, WOW, a big day today, after posting this Fib fan chart with that upper trend line for the last two months, calling for a minimum price target of 1200, we finally hit both in the same day. This is an important point of resistance, that if broken, could become support for the SPX. Needless to say, the bears need this line to hold.


  1. Hello
    Big move up today (as you had indicated should happen). The question I have is this looks impressive with both INTC and JPM crushing the numbers - should one deploy some fresh capital now or is this the last steps before the drop???
    Thanks for your time.

  2. Smokeyeyed, I try and avoid giving that kind of advice, I much prefer people to make that decision for themselves, I have no idea what circumstances you are in or what your risk tolerances are. If you do decide to go long, I WILL recommend tight, trailing stops!!!
    And this can be the last thrust up with a short-term increase in volume and breadth, sorta of the last gasp.

  3. Hello
    No problem - it just looked strong today and I may have to convert from the bear camp to the bulls although I have had no idea we would actually be up here above 1200 on S&P.
    On your entry for the 1-2 1-2 up where would that put 5 then or is that count now out the window and we are on our way to new all time highs?
    Great work - I read your blog everyday and I thank you for your insight.