Saturday, October 30, 2010

10/30/10 - Weekend Thoughts [EDIT: 4:40 PM]

SPX - Triangle Options

I'll be posting my thoughts throughout the weekend. Usually I add the most recent posts on top. This weekend, as I add to this post, I will add updates to the bottom to make it easier to follow my thoughts from beginning to end.

Here's a recap of my EOD post yesterday and the three options I'm looking for next week :

Option 1: Labels in black.

The market completed the triangle today.

Option 2: Labels in blue.

The market is still working on subwave [D] of the triangle and subwave (x) of [D] completed today. Next week, we may get a pop but not break above 1195.35. The range for (y) of [D] could be anywhere from the blue trendline to the green horizontal line above.

Option 3: Labels in pink.

The market is still working on subwave [C] with waves A and B of (y) completing today. A selloff next week would drop the market anywhere below so long as it is not below 1159.71.

The triangle will be deemed complete or voided should any of the two horizontal lines get breached; complete if breached to the upside and voided if breached to the downside.

SPX - Similarity

This chart is a work up of the chart I posted yesterday at 11:48 when I noticed the similar pattern taking place.

Interesting that both patterns completed their triangles on a Friday. Will we see a gap up pop on Monday just like the first one?

If the market continues to repeat the pattern, I'm looking for a move higher targeting the Fib targets ranging from 1193-1205. This matches well with option 1 of the 1st chart above.
However, be mindful of the descending trendline resistance on MACD which would result in a triple negative divergence if we make a higher price high.

There is no denying that a series of three wave structures have played out. The most likely pattern is that of a triangle.

I will add that though I removed the ending diagonal count from the options (see post), I am contemplating bringing it back.

I have been trying to label the rally off the Aug low and the ED still fits the best. Though there is an issue with the ED technically, it still looks like one in form. If anything, odds are still pretty good to consider it as an option since the NDX sports a decent count supporting this option.

I have sent EWI an email to clarify this issue. Not sure if anyone will answer it this weekend. If I get a response, I will certainly update you all.

Why you may ask would I still consider this? Based on the similarity chart above, if we see the thrust up next week, it may represent the last push for wave 5 of the ED.

Whether you want to dismiss it or not, we must be prepared in the event that we see a sharp reversal. I'll post the ED chart later today.

As for what I'm preparing for next, see last weekend's thoughts. Gotta run for now.

[EDIT: 4:40 PM]

Here's the ED option. I have notated the issue above. I believe everything else counts out correctly. Triangle or ED, both imply the same thing at the moment; up and both allow for approximately the same level higher.

Here's the update on the triangle count, which is starting to look like a good barrier (ascending) triangle.

The EUR/USD looks to have completed an a-b-c flat wave 4 and may also be working on wave d up of a triangle.

The US dollar index looks like it completed a wave 4 flat as well but in the opposite direction which would be positive for equities. This of course disregards the glitch on the 22nd.
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