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Thursday, December 31, 2009

Minis (update 1:27pm)

Lots of probes of 1880 but rejected yet again...

The market has obeyed this trendline in the DJIA now for 10 months. As Robert Prechter likes to say, I didn't make this trendline, the market did.  You can see it requires ever more and more up moves to keep from doing a cliff dive.

I am guessing a spasm higher is coming next Monday but then a hard reversal seems to be in the cards and a very hard selloff ensue.  I am not just saying this out of wishful thinking, after all the wave structure happens to agree. If there is to be a Minute [v] to C of (Z) of [2], then indeed, thats the top.

I wouldn't want to be long when this trendline breaks with authority.

Here is a simplified version of what the overall "C' wave appears to consists of.  We are seeking confirmation of Minute [iv] .  Obviously the low volume environment is helping to enable the sideways drift. Minute [iv] could be taking the form of a complex double three or so.

Here is what EWP says about the reason why double three's take place:

"In a combination, the the first pattern often constitutes an adequate price correction. The doubling or tripling occurs mainly to extend the duration of the corrective process after price targets have been substantially met. Sometimes additional time is needed to reach a channel line or achieve a stronger kinship with the other correction in an impulse."

So in this case, maintaining upper support appears paramount. We can see that on the SPX that there is simply not much room to correct in price downward and maintain a breakout above 1113 -1116.  Same here on the Wilshire you can see overall support fairly easily.   If the SPX breaks below 1116, then it could very well fail or at the least morph into an ED situation which is obviously a bearish ending pattern.

But for the Wilshire, if we entertain a channel, the price is moving slowly to the right to meet that channel. It doesn't have to be exact of course but as the above theory states in EWP, "to achieve a stronger kinship" with the previous correction. Minute [ii], as I have labeled here, is a deep sharp correction that carved a big potential up channel. So Minute [iv] is playing along..

The thick support layer I have at the 38% FIB retrace is also a logical price retrace for the Wilshire or somewhere just above it.  Its trying to hang on to upper support but things aren't looking great.

By the way this is why I got into the habit of shorting a wave [iii] top (and selling a wave 3 bottom), particularly a thrust out of what appears to be an ascending triangle.
You just never know how the rest of the pattern will play out. Remember the missing wave 5 at the March lows? Triangle thrusts will keep you guessing.

I am about fully short and am hoping for higher prices to go leveraged short in a wave [v] but I'll obviously wait to see what happens on Monday, January 4th.

At this stage of the game, it appears the indexes are just trying to hang on until the New Year and with no big sellers just yet, I wouldn't doubt it. The double three triangle has failed but still fits into an overall count.

Minute [iv] seems to be still unfolding (at least for the DOW) is the best count so far...

Probing the 1880 level.  Its possible to make an ascending triangle out of it all. Its certainly not a textbook triangle so nothing is certain. But then again its usually the non-textbook ones that work.

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