Wednesday, March 11, 2009

Wave 4 could be over...tomorrow will be our clue

The bulls ran out of steam today and were never able to get above my 734 containment call. Since we ran instantly higher today, I've moved my irregular flat forecast to my #1 position and my triangle forecast to #2. After looking over the pivots, I believe a close below 700, especially below 696 could be a major death blow to this rally, so that is what I will watch for tomorrow. Two other times this year we've had big rallies stall with a doji/falling star candle, and both times the next day was a gap down and the start of another down leg. Will tomorrow make it 3rd? I've certainly positioned my portfolio for it, but in the end it will be the market that makes the call. On the bullside, a close above 734 could create some serious problems for the intermediate time frame for the bears. We closed below key support today (724), so that is another plus side for the bears.

I've also redrawn the channel to an EW channel: connecting waves 2&4 and using that to project wave 5 off of wave 3. Because wave 3 has been so timid, we could break the target to the downside in a massive capitulation day, but it is not required, so I will elect to get more conservative as we approach the line. But first things first, 696, may it fall tomorrow.


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