Saturday, August 27, 2011

The Triangle Breaks Up [8/28/11 8:23 PM Update]

[8/28/11 8:23 PM Update]

With ES up 8 and change tonight, I wanted to explore the fib extension targets for wave (iii) should ES hold and this gaps up at the open tomorrow. Wave (iii) makes a nice target at 1213 if it's 1.618*(i) and 1241 if 2.618*(i). Notice both Fib confluences.

Will see several hours from now if the mid-channel contains this move up. 15 min MACD appears to be building a negative divergence.

[8/27/11 Update]
I believe the odds are greater that the market will break up and out of the triangle that many analysts are watching, which implies either: 1. A larger degree wave 2 bounce is in progress 2. A wave 4 flat is in progress or 3. The correction is over and on to new highs.

The transports clearly sports five waves down with a lower low for wave 5 and an hourly MACD positive divergence to boot. To me this is telegraphing a much higher bounce is in store and would imply that SPX and others most likely will break up and out of their triangles.



All bets are off for the triangle if the market should rally over 1208.47.

SPX - 5 min

Here's a 5 minute chart showing five clear waves down off wave 4. Wave five in this case for SPX truncated. Again, the transports made a lower wave 5 here.

A nice bounce so far off the mid-channel.

Bollinger Bands - Daily

I don't believe this rebound is a wave 2 of 5 either because of the confirmed daily MACD buy signal so I'm going to presume that 1208 will most likely be taken out.

And last but not least. Anyone consider this option? Would be a great way to fool everyone.
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