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Wednesday, November 25, 2009

Refining the Count(s)

The reason I like to use e-minis is sometimes it helps in determining whats happening in the cash index. A reader Mark made a comment that he cannot see it selling off 2-3% because that would be hard to recover and why would it stop?

And with market sentiment taking a strong turn toward bullishness this past week, I almost think that my [a][b][c] flat is a little too bearish at this stage of the game. I will say if a move back down to 1085 or so happens then the final move to P2 peak could indeed take us through the late December period. Ala "Christmas rally" or whatever. I haven't discounted this scenario.

But I am considering the minor B of (Z) triangle scenario in that the [e] wave will come shortly and hold above the pivot point of 1097 where I have [c] marked. It would qualify as an ascending triangle and the target (using the width of the triangle) for that would be approximately 1137 SPX. Not that the target has to be hit exactly.

If the market was to perform this move, bullish sentiment would be screaming even if it only makes it to 1129 or whatever. The VIX would easily drop to less than 20 and the dollar would probably be crushed which I expect because we need extreme bearishness in the dollar.

The Effect on Sentiment:
A break above 1110-1113 would be a break out move and who wouldn't think we weren't going to 1200 or at least 1158? Blowing through 1121 also would be bullish.

So 1137 more or less sounds about a good spot to stop.....

And this would happen within the next 2-3 weeks and there would actually be no Christmas rally to speak of at least not during Christmas itself.

So when everyone is on "cruise control" til the end of the year, somebody may decide to pull the plug early and the autobot trading computers, who have taken over the markets, bearish algo's kick in and sell, sell sell.

Anyways its a thought.

So my top 2 or 3 counts is either the [a][b][c] flat with a bearish [c] wave down to 1088 or so, or a triangle [e] wave that holds above 1097. There is not a whole lot of difference between the two I guess.

Anything deeper than 1088 at this point is in danger of permanently staying underwater. I would be willing to see a move to 1075 and see a slow recovery rally taking place for Minor C of (Z) but that scenario would likely take longer to recover and that would mean P2 would probably peak in January sometime.

Count Options:
Option 1: The least retrace holds above 1097 in an [e] of and ascending triangle for Minor B. This gets P2 gets over with the quickest and sets a target of 1137 for Minor C of (Z). Bullishness peaks in euphoria.

Option 2: A medium retrace to 1086-88 would be a [c] of a flat count for Minor B. The ensuing Minor C of (Z) P2 peak takes a bit longer to occur.

Option 3: A deeper retrace down 1060-1075 in a [c] of Minor B would likely be an expanded flat for Minor B or downward flat. A recovery Minor C of (Z) to P2 peak would probably take longer and occur in early to mid January 2010.

But everything is kind of pointing toward the shortest option(s) at the moment.

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