Tuesday, May 4, 2010

5/4/10 - SPX EOD - DOUBLE THREE : ZIGZAG



SPX - 60 MIN PREFERRED COUNT

SPX - DAILY EMAs

SPX - DAILY SMAs

E-MINI

SPX - 60 MIN REVERSE FIBONACCI

Well today was a good day for the bears. The entire month of April provided a nice opportunity to trade a very decent range. 

As posted this morning, there were two combination Elliott Wave patterns I wanted you to be aware of. The triangle option is certainly out, however, the flat-x-zigzag combination is right on the money at this time. 

I was looking at 1180 for support but knew if it broke, 1170 +/- 5 was next on the list. 1170 coincided with wave (c) = 1.618 (a) of the zigzag (~1166), the 50 day MA and a heavy Fibonacci confluence occurs here. I posted on this last week on reverse Fibonacci techniques (click on the link as I used the technique to predict where the market may head and find a turn). An  updated reverse Fibonacci chart is above.
The count still allows for (c) to equal 2.168*(a), which equals approximately 1140. So we will have to keep an eye out for that. From a probability standpoint per EW, the 1.618 ratio is a more typical relationship that wave C has to A.

So what does this pattern have going for it?

1. Structurally the count looks complete (technically can be counted as complete). 
2. The structure off 1219.80 looks primarily as a 3-wave structure vs a 5-wave impulse
3. Fibonacci relationship of Wave C to A
4. Market found support at the 50 day MA
5. Trendline support : Ascending (Marc 2009 - Feb 2010) and the lower Channel line

Some alternatives for the double three combination are:
1. Minute [x] of Minor B may have completed at 1205.13 on 5/3, which would mean today's drop is only the beginning of (a) of [y]
2. Minute [x] is appropriately labeled and we may be working out a second flat vs a triangle. 
3. Wave (c) of [y] may have some more to go; target ~ 1140.
Both alternates imply that a bounce back up is required before resuming a drop to complete the double three formation. 

For the bear case, here are few things to keep in mind.
1. The count appears to have a nested 1-2 formation. This implies that today's drop was the 3rd of the 3rd and should follow through some more tomorrow.
2. Notice on the daily SMA chart, the last decent pullback we had rested on the 50 day MA and followed through the following day before finding support at 1044.50.  
3. A break of the neckline of the large head and shoulders pattern. Would like to see a backtest and drop to confirm.

I'm anticipating a bounce back towards 1180-1185 since either bull / bear case will seek this at a minimum, whether it is a backtest of the neckline, a wave 4 retrace of 3 or an x wave up of another flat. Where it goes from there will be telling. 

GL!

3 comments:

  1. great analysis, appreciated as always!

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  2. There is much to study the corrections in periods of bull market corrections and we've had well over 10%, the maximum was 12.50% which occurred between 2003 to 2007 more precisely at the end of the bull, because the current had two corrections above 10% but never exceeded 11%.
    Data: cfd SP

    'm www.mercadosbull.blogspot.com

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  3. Thank you both for the kind words and comment. GL!

    ReplyDelete