3/23/10 - SPX EOD [6:00 PM PST Update]

[6:00 PM PST Update]

Here's a count for the SPX near the top. I still think this is most likely an expanded flat for minute [iv]. If it is, minuette (b) of minute [iv] is working higher. One target that looks good is the 138% level of minuette (a) represented by the blue Fib levels.

Anything more than that and the probability that it is a minute [iv] diminishes.

Something else to note. The structure down from 1169.84 can either be counted as a 3 or 5 wave structure. I have traced the pattern in pink and orange. The bounce since 1152.88 so far looks only like a 3 wave structure.

Corrective waves form two types of patterns; either a 3-3-5 (Flat) or 5-3-5 (Zigzag). For both patterns the second wave is always a 3 wave structure, which is what we are seeing at the moment off the 1152.88 bottom. Unless the structure up from 1152.88 adds a 4 wave tomorrow, it stands to reason that we may be seeing either a minute [iv] flat or zigzag.
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IWM


DOW Weekly MACD
The IWM count is for you Scrappy. I put this together real quick so I must caution YOU, I did not dig deep into the count to make sure my Intermediate labels are correct. However, it appears at first glance to be that way. Two things on the chart stick out to me that I like.

The first is the H&S formation and target. Notice where there backtest of the neckline occurred. It was strong support. Second, I like the fact that Minor C of (Z) = 1.618x A of (Z) right around the same area as the H&S target.

And of course watch that it does not hit that level.

However, here is where the DOW chart above comes into play that should be concerning to the bears. The weekly MACD on the DOW has crossed up bullish. It makes me think we may see some higher highs in the not too distance future (albeit a pullback is still in store, check the charts below for targets on that)

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[3:00 PM PST Update]

I included a chart of the SPY highlighting the potential cup and handle formation. As noted on the chart, the only issue with this formation is the shape of the cup. It is pretty sharp and I believe the shape of the bottom should be more rounded.

We'll keep an eye on it anyway. If anything it may turn out to be another inverted H&S, which I believe the SPX is further along in.
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Trade example #2 was stopped out today. If this minute [iii] continues to extend, it is a good thing that one is out of the trade until a better setup comes along.

By the end of the day I still question whether minute [iv] has completed or minute [iii] is still pushing higher towards the inverted H&S target near 1185.

And if it is working towards a top, is it Minor A of (Z) or C of (Z)? That can be addressed when the time comes.

I think the market wants to ride it back up to the upper ascending trendline, which coincides nicely with the the inverted H&S target as well as maintain the current channel that it is in. If and when it hits this point, we'll have to see what the response will be.

If it is not the top of P2, then a minor B wave of (Z) is what I have listed as the alternative. There are various levels the minor B wave can target (neckline of the H&S, lower ascending trendline)

If it turns out to be a Minor B wave down, this brings up another formation potentially forming founded by William O'neil of Investor's Business Daily, the Cup and Handle. Click the link for more on this formation. The bottom of the cup is where I have B green at 1044.50 labeled.

Lastly, since the move off 1169.84 still look like 3 wave structures down to 1152.88 and another 3 wave structure from 1152.88 up to the close today, this may still be considered a minute [iv] expanded flat. I mentioned this potential formation earlier in the day in the trade example #2 post.

Wave b of the expanded flat starts from 1152.88. In order to meet the EW guidelines, wave b should not exceed 1176, which would make b greater than 1.38 x wave a (1169.84-1152.88). Though this is not a rule-breaker, but anything above that and the likelihood that this formation from 1169.84 is an expanded flat diminishes.