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Tuesday, January 5, 2010

DJIA Count and Puzzle Pieces.

Counting the DJIA's (Z) wave zigzag, one can easily come to the conclusion that it is indeed in an ending diagonal pattern. Today's price action was like a (b) wave.  What I really like about this DOW chart is that the waves work very well internally for the B wave corrective. It appears to count best as a nested [b] wave expanded flat inside another expanded [a][b][c] flat.  And also, it is very easy to count zigzags up in the C wave. Certainly the wave [ii] and [iv] look like zigzags.

This is an importanct chart because it is warning of a big reversal and a big selloff. Ending diagonals collapse once they finish and a price collapse here will send it through the lower uprising trendline.

In fact, I can see the DOW selling off some 400-500-600 points back toward 10000-10100 in a few days time.

What will it take to complete? A big spasm higher and some "overthrow". That would match the ED pattern on the VIX I showed tonight.

Financials spent a LOT of energy just to get back under resistance.  You can see on this hourly chart, the RSI peaks occur nearly at the price highs. I wouldn't buy em here. Sorry, I'll watch.

Apple hit my $213-216 price range. I can also see an ED count in its final wave (5)

Here is the wave (5) subwaves.

And again, zooming in even closer to look at just the final Minor wave 5, here is a potential ending diagonal on Apple. It also needs a new squeaker high.

Amazon has a head and shoulders in place.

Bidu is near the trendline.

Oil has yet to hit my $85 price target, but the triple ZZ pattern is looking a lot better. Oil is near overbought.

See a pattern here? These charts and more seem like they are ready to finish out.  Lets review what a new high will do:

1. About all world markets have or will make important peaks.
2. Oil will make its high.
3. The dollar will make its wave 2 price low.
4. The VIX will complete an ED with perhaps throwover.
5. The DJIA will complete its ED with perhaps throwover.
6. The Wilshire will reach its Fib targets/triangle targets. Same with RUT perhaps.
7. Everything will peak just about perfectly.
8. Perhaps a non-confirmation in the transports (they do not make a new reaction high).

What happens when P2 is set?

1. A massive selloff. I still believe there is a pent-up demand to sell, I think everyone is mesmerized or waiting in the wings. Or they will get caught with their pants down.

2.  The first wave down will be a doozy and won't allow anyone to "buy the dips".   Sure they can buy the dips 400-500 DOW points lower, but now a bit of doubt will creep in. The technical damage may be too much. Thats why I think the first wave down will be harsh. An ED pattern will help ensure that happens.

Anyways, these are my thoughts. I certainly hope we get a bull rush tomorrow to complete this scenario.  All the puzzle pieces seem to fit very nicely. Not to mention, bullishness is wired for sound.

And if none of this happens, well, you cannot say its not a good scenario. It is.  I'll surely try again next week...
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