Saturday, October 15, 2011

Weekend Update [12:20 PM Udpate]

[12:20 PM Udpate]

The 2 year bull channel chart looks like it may need a third push higher to create to create the 3-push pattern.


Weekend Update

Had an extremely busy day yesterday so I'll just skip right to the weekend update.

The bottom line  is that I am looking for the completion of this first wave (1/A) up near term.At minimum I'm looking for a three wave move up.

Extensions, however, make it hard to figure that out. What may be easier to do at the moment is identify some possible targets of resistance based on MAs, previous support/resistance levels and pivots:

1223 = 38% retracement of the 7/7/11 high to 10/4/11 low
1230 = 20 week SMA
1230 = 5=1 green at 1228 (See 15 m chart below)

1250 = 62% Fib retracement of the 7/7/11 high to 10/4/11 low
1250 = top of the descending channel (See the Primary count chart below)
1250 = three push pattern to the top of the trendline ( See 15 m chart below)
1250 = 3/16/11 swing low now as resistance

1265 = 50 week SMA
1276 = 200 day SMA

So far it appears that 1250 should provide formidable resistance should the market push past 1223 and 1230.

As you will see below I present several charts supporting a bull and bear case over the next several months and so far the bulls have several things going for them. Again, at minimum I am looking for a minimum three wave move up with this first one nearing completion.

BULL CASE


15m

That count above looks close to complete and the fib targets for wave 5 green line up with a possible termination point. However, the past week was difficult trying to determine the terminus of this wave so I won't rely too much on the count but more so on the levels mentioned above should the market break through 1223 or 1230.
Blue
Bottom line again, still searching for the completion of wave (1). A wave (2) pullback would set the right shoulder of an inverted head and shoulders that would target approximately 1370.


Primary
An update on the longer term outlook. Keep in mind the bearish alternate but remember that it aligns with the bullish count for now since both require at least a three wave push higher and we're still trying to find the end to the first wave.



Weekly

Several bullish things here. The market closed over the 13 and 80 week SMAs which have in the past have marked key support and resistance areas.

Look at the bullish Marubuzo candlestick confirming the previous weekly hammer.

MACD is hooking up and the histograms are quickly exiting the negative territory.

NYA - Breadth Thrust

Earlier in the week I presented this chart and a stockcharts.com explanation on the breadth thrust. The NYA has clearly followed this example. The implications here are that  protracted rise may be in store, which lines up with the primary count.

2 Year Channel



[12:20 PM Update] : I just noticed that this may qualify as a three push pattern trying to complete. Let's keep an eye on it.

Once again just another view highlighting the positive divergence and the resulting moves. Couple this with the NYA breadth thrust, weekly bullish indicators and wave counts, and I think the bulls may have a chance of forming new highs by the end of the year.

BEAR CASE

We must not forget the bearish case though. Below is the 2008 analog that many have been following and something that should be respected. Couple this with the monthly MACD confirmed sell signal and the fact that the market is still trading under the 50 week SMA, the bulls need to still remain somewhat cautious. 

The present rally is setting up the right shoulder of a head and shoulders that targets approximately 850ish. 

For now, the bear case is looking for a three wave corrective move and like the bullish case, it is still looking for the completion of the first leg. 


2008 Repeat?
Monthly

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