Tuesday, March 1, 2011

3/1/11 EOD Update [9:02 PM Update]

[9:02 PM Update]

5 Min

I believe this is the correct count for the decline. You have an expanded flat that retraced all of wave 1/A nearly a perfect 61.8%.

Granted there is a way to count this decline as impulsive but it must begin at today's high and I think there are some issues with that internally (with the squiggles). But let's just say it really can be counted as five waves down, it's most likely done.

So whether the corrective count is in play or if the impulse count is in play, both are implying the same thing for tomorrow, most likely a bounce. How high is the question.

We'll just use the red Fib retrace targets as our guide. Now the structure has a wedgish pattern going for it. Though it is not an ED, it may still result in a retrace that is sharp and possibly target 78%, which is 1325ish.

If the triangle is in play, the green trendline will contain it above and if not then it is something more bullish.


One other thing to note is the first leg down on ES. It does not count/look impulsive at all and without a doubt a corrective move down to me. I think it also sports a flat like cash.

However, with all that being said, there is a clear level down below (1294.26) on cash that should be watched if Mr. Market wants to head lower.

EOD Update

Yesterday, I posted these options that I would be looking for:

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.

Looks like 1332.26 was good enough for my wave (b). Of the three options, the market is behaving most likely as scenario 2 so that is my primary focus at the moment. Keep in mind all three options are still in play.

Believe it or not, I believe today's drop still has some corrective qualities to it. In fact, the leg up off the 2/24 low counts as a better five wave pattern up and today's drop to include the leg from 2/28 high may be counted as an expanded flat.

Anyway, the 60 min chart above is something I'll be watching over the next day or two. 1332.09 and 1294.26 are the key levels to watch along with the characteristics of the wave structure.

I'll try to put out a squiggle count of today's drop to see if any other clues may be gleaned from the structure.

BTW, a bearish daily engulfing candle did form today and the lower daily BollingerBand sits at 1296.67.
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