Saturday, December 5, 2009

12/4 - SPX Expanding Diagonal Minor B?

Do I believe P2 has ended? I'm still not sure but I do feel a larger trend change is in the works and possibly a retreat much lower then what I present below.

However, I do believe what I present below is a pretty valid analysis and count. Therefore, if price drops to 1080 next week and bounces, I'd keep this count in mind. Price behavior at 1080 will be key.

Those of you who read my blog daily know I have frequently referred to the daily MACD crosses and the ensuing price behavior. As stated in my previous post, I am expecting a move to 1080 if the pattern continues.

In this case, a cross occurred on 11/25 and if the lower purple trendline maintains the pattern, 1080 is the expected target.

A few bloggers (refer to my blogroll) have presented an Expanding Diagonal triangle is in the works. This count may just work out if the MACD analysis is correct.

Notice that the MACD analysis trendline (purple), the lower expanding diagonal trendline (red) and the Jul - Nov trendline (green) all intersect at 1080. This would be a nice stopping point for wave e of the expanding diagonal and Minor B.

Using Fibonacci expansion ratios, we could project a move for Minor C and with that the end of P2.

If this count plays out, the two levels I'll be keying on are C=.618xA at 1132 and C=A at 1164. I believe both levels are good potential targets.

I like 1132 because price continues to wedge tighter and that would correspond well with the blue wedge line and green wedge line (Jul-Nov). 1132 would also make sense if we are expecting a 50% retracement target (actual level would be 1121) that results in a throw over (a 10 point one in this case; 1121 + 10 = 1131) to end it all.

1164 also works out as well since this would intersect with the upper purple trendline which price has respected over the past 3 months.

Again, 1080 will be key to watch.


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