Monday, February 28, 2011

2/28/11 EOD Update [5:02 Update]

[5:02 Update]

INDU double inverted head and shoulders?


Looks like maybe working on five waves up? Just not sure if the squiggles support that.

[3:28 Update]

Another way to count the squiggles since the 2/24 low. I had a discussion with Prasad from the room on this possibility. Though I still favor the corrective count, this one surely may apply.

On the 10 min chart below:

3/C = .618* 1/A at 1342 or
3/C = 1/A at 1355

10 Min

[3:12 PM Update]

TRANS - Daily

A five wave count up for Trannies is looking pretty good here.

EOD Update

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Daily Bollinger Band

The market managed to close above the 20 day SMA once again. The daily MACD histograms are beginning to show a small kink in the down trend. The top of the Band is indicating 1346. Is that what the market wants?

Yesterday, I posted these options that I would be looking at for today.

1. Market hits 1325-1330 and pulls back. If the next leg down holds above 1294 and then bounces up and takes out 1330, most likely that leg up will target at least 1340, which would bring the flat into play.

2. Market hits 1325-1330 and then trades between 1294- 1330 over the next several days, a triangle may be working out.

3. Market hits 1325-1330 and pulls back taking out 1294, then 1280 is most likely where it is headed.

Obviously all three options are still in play but given today's action, I am still favoring option 1.

Daily Primary

Here's an updated look at my daily primary count. Wave (b) of [4] has currently retraced wave (a) by approximately 72%. 18% more and the flat requirement will have been met.

5 Min

Here's closer look on the 5 min. As I posted in the chat room today, the purple trendline was going to play a role and need to be be watched.

The market jumped over it this AM and pulled back before bouncing off this line.

I still believe this is all a corrective move so the primary thought is that this is a wave c of y heading for 1335-1340.

We must remain flexible though because it may turn into a more complex corrective and I may have to relabel it as a wave y up.

Ok. Gotta run for now. I'll try to post more charts later.

2/28/11 - 8:35 AM Update

8:35 AM Update

5 Min
Watch that purple ascending trendline for support too. That would serve as a backtest of the neckline of that potential inv h/s.

For the bear count, this may be wave 3 down of wave 1 of a new impulse down.

Pre Market

Sunday, February 27, 2011

2/27/11 - 9:57 PM Update

9:57 PM Update

Some possible ways to count ES tonight at 9:57 PM. We'll see what happens overnight.

5 min

Just some additional thoughts on a Sunday of the near term picture and the most recent decline and bounce.

A few days ago I posted my thoughts on the leg down and how it counts better as a corrective. I still believe this is the case.

First off, I am still seeing folks count that steep drop as a wave 1. To me, that looks more characteristic of a third leg down, whether a wave 3 of C.

In my case it is best represented as a wave C. Look at subwaves a and b red above. Folks counting that drop as a wave 1 seem to ignore those other waves that clearly make it a three wave structure.

Now say that wave 1 is correct, well what would be wave 3 just looks to choppy to me. Take a look at the 1 min chart on that and you will see how much overlap occurs. Hardly characteristic of a third wave.

So with that in mind, I still say odds are greater this move down since 2/18 is corrective.

However, for this time frame, all the above may not matter because you see, the first three waves at the larger in any direction are still three waves whether you count them as 1-2-3, a-b-c or w-x-y.

I'm just putting this out there for folks who are learning EW and the need to understand that technically it is still important to realize the difference here because the waves are working at all degrees.

Where one will get in trouble is at the larger degree once it all plays out. Folks counting this as an impulse down, without recognizing that this may very well be corrective, may be hoping for a much deeper pullback beyond 1280 unnecessarily.

Enough on that for now. So for the near term bounce, I'm still looking for a target of 1325-1330 along with other folks.

I have a potential triangle working out before a final wave c of y targets those areas. On the chart I show some other levels matching Fibonacci targets based on the length of wave w blue and wave a green.

I have mentioned that I am keeping an eye out for a potential flat or triangle to play out at the larger degree for wave [4].

A hint that a flat may be in the works is a 90% retracement of this decline. If the flat is to play out, the market will have to rally back to 1340. The EW rule for flats is that wave b must retrace wave a a minimum of 90%.

For a triangle, typical subwave retracements are 62-80%. The market is nearly there.

Now, if the correction here is going to take on a steeper double zigzag targeting 1280, this bounce cannot reach the 90% retracement and must drop back below 1294.

If you have made it this far, just a summary of what I'm thinking will happen over the next few days:

1. Market hits 1325-1330 and pulls back. If the next leg down holds above 1294 and then bounces up and takes out 1330, most likely that leg up will target at least 1340, which would bring the flat into play.

2. Market hits 1325-1330 and then trades between 1294- 1330 over the next several days, a triangle may be working out.

3. Market hits 1325-1330 and pulls back taking out 1294, then 1280 is most likely where it is headed.

Friday, February 25, 2011

2/25/11 - EOD Update [2:43 PM Update]

[2:43 PM Update]

Here's an update to the five wave impulse down count.

Here's the corrective version. Target of approx 1325-1328.

EOD Update

Daily Primary

Looks like wave (b) began as expected. The market closed right around that lower channel. Is (b) of [4] complete yet? I'm not so sure. I believe at least one more little push towards 1325 is in store.

From there, we'll have to see if the bounce represents only wave a of (b) or if it was all of (b).

5 min

An ascending triangle looks to be in the works and the count supports another push towards 1325. The ascending tri target also marks 1325 as the target. We'll see.

Daily Bollinger Bands

A pretty decent bullish candle there off the lows. The market closed back above the 20 day MA as well.

A possible repeat?

2/25/11 - Pre Market [5:11 AM Update]

[5:11 AM Update]

The channel charts below highlight what I'm thinking as mentioned previously at 4:43 AM below. It will help provide guidance to determine if the market goes to 1275 sooner than later or on to a much higher retracement to form a flat.

30 Min Closeup

Notice the underside of this channel targets approx 1313. This is different than the trendline that connects the Oct-Nov lows.

So if the market recaptures that channel, it most likely will climb higher. If it is rejected here, then the next leg down is probably in store towards the mid channel at 1278ish, which is a very relevant level.

I'll throw this chart up as a possible path the market may take if it want's to form a triangle. Notice that the first three waves (a, b and c) of a triangle is also the same as a flat formation. Granted wave c would usually pullback at least towards the end of wave a. However, running flats do not require wave Cs to travel that far. Again, just things to keep in mind as to the possible market paths based on my larger primary count.

Pre Market [4:43 AM]

As expected/anticipated, ES is up a decent amount. Will it hold into the open or swing wildly like it has the past few days.

I have a feeling it's going to hold since the ME/oil situation has been assuaged for now.

Here is the 5 min chart with a few little updates. I highlighted (bold green) the Aug-Nov 2010 trendline, which price is currently below.

I believe what the market does here initially this AM will tell us if the market is going to make a much steeper retracement. The underside of this trendline is currently near 1315.

I believe we will get a minimum of 1315 and backtest the underside of the trendline. That would also make wave c/y red = .618*a/w red.

Should the market manage to rally above that level c/y = a/w red at nearly 1320. I believe this may complete wave w blue. Or this may just complete all of the correction and it may hit the head and shoulders target at approximately 1325.

Wave x will then retrace back to the trendline and find support there before bouncing higher for wave y.

Keep in mind this scenario is a corrective structure, which would required a series of three wave structures.

Let's see how this pans out.

Thursday, February 24, 2011

2/24/11 EOD Update [4:28 PM Update]

[4:28 PM Update]

And adding to the flat potential for [4], don't forget the large gap above that I think will most likely be filled.

I added the 5 min chart with some options here to with regards to the degrees of this bounce. It is possible the market may only be working on teh first double zigzag for (b) of [4]. I say this because an inverted head and shoulders pattern may be in the works and I see the larger wxy (blue) play out targeting 1325.

Keep in mind that wxy (blue) may also just represent a larger degree wave a of (b) of [4] to. I mentioned in the chat room that this wave [4] will most likely frustrate everyone with the massive choppiness and multiple zigzags and combinations.

So just keep that in mind and stay flexible.

[4:03 PM Update]


I added an option into the main count here. We know that wave 4s, per EW guidelines, "is usually a flat, triangle or flat combination.".

Given that, I wanted to the add the possibility that wave (b) may be a steep retrace to form a potential flat. We'll also keep the triangle potential in mind along with the option down below.

I believe wave (a) of [4] is most likely done based on the count and also because I believe MACD may respect the long term trendline it just touched today. If it breaks below then 1275 is certainly in the cards.

It's later now.

EOD Update

More later...

Primary Count

5 Min of Main

Optional Counts

2/24/11 - 8:12 AM Update

8:12 AM Update

Something else to keep in mind.

7:43 AM Update
This may be the most likely scenario. Gotta keep watch.
6:04 AM Update

Well that was quick.

Pre Market

Futures trading lower once again and markets look set to open lower. I forgot to include my wave count depicting five waves down. The alternate on the count shows the mini rally near the close as a wave 4.

Should futures remain in the red and the market decides to drop below 1300, that may be the correct count.

As far as the futures count goes, I don't think there is any other way to count it other than corrective down unless I'm missing something. A wxy corrective looks to be the best label.

Wave y may be in should price break above the channel, however, it appears there might be an ED forming for wave y as well. If the ED is playing out, it appears a fourth wave of the ED is in the works.

As always, we shall see...

Wednesday, February 23, 2011

2/23/11 - EOD Post

EOD Post

The primary count. The earlier count was invalidated with the 4-1 overlap. I believe the market completed wave (a) of [4] and is not working on wave (b) of [4].

5 Min

Wave w of (b) may target 1320.

Gotta run for now. I'll try to add more a little later.

11:55 AM Update

11:55 AM Update

I'm leaning more towards this count. I like where red a of y blue is too. c=a.

Something I mentioned in the chat room to keep in mind is that assuming we are in a minute [4] (again my count), we may experience a few weeks of choppy action up and down so be prepared to become frustrated with three wave structures up and down.

I can see this bounce right now morphing into a series of double ZZs to form b of [4] and may appear only corrective up but may surprise and correct higher than most may think. For instance, we may see a flat in the works or a running triangle in the works. If those two play out, wave b can make (it should to be qualified as such) a new high.

But before we go there, the market needs to take back 1315, which happens to be the underside of the broken trendline.

However, should the market reverse most of today's drop, a daily hammer candle will form. Notice how that hammer will play out in relation to the channel chart below.

8:55 AM Update

This or...


7:21 AM Update

This or....

Tuesday, February 22, 2011

EOD Update [3:20 PM Update]

[3:20 PM Update]

Here's the 3 min chart for the case on a corrective down count. Just a few things that favor this as corrective.

[2:27 PM Update]

I forgot to include this chart earlier. Here's a breakdown of the waves counting the decline as a five wave structure to form either wave 1 or a of minute [4].

By this count, I'm expecting a bounce to target the 38-50% Fib retrace levels at approximately 1325-1330.

EOD Update

This is all I have time for right now. My primary is still in tact. I believe wave 4 of [3] completed today. The alternate is that wave [3] was put in last week and we just witnessed the first leg, wave a of [4].

I'll try to post more charts and my thoughts later. It is possible to count five waves down but there are some issues with it. Regardless, I believe a bounce is in store since 1313 held and a close above the 20 MA and above some pretty decent trendlines.

Do we treat both ME issues as a dip buying opportunity? Hmmm.....

9:27 AM Update

9:27 AM Update

8:59 AM Update

Some counts to consider. 1325 is the key level to watch here. Showing a possible positive divergence on MACD at 1-5 mins.

Still keeping an eye on this count here. It's a long ways down but 1308.86 must hold for this to remain valid.

8:59 AM Update