Wednesday, April 15, 2009

Close, but not yet

Well, we traded down to our support line and bounced off it -- hard! We should know immediately if we are in wave B or in the final leg of our ED as the 855 resistance zone should hold any upside tomorrow. If it doesn't, then we will likely get our overthrow. Upside should be contained in the 870 zone, but it could go as high as 880 w/o changing the pattern.


  1. Being an OEXP week it is hard to say where the most pain will occur. If there are a ton of calls that will expire worthless at 850+ then the market will head south. Also, I read that Thursday a week before expr moves opposite of what the market will do at expr.

  2. 877 is Fib 816 rt to 1007 high on spx.

  3. Hi Rich,

    How did you come up with the maximum allowable level for an overthrow in an ED? In this case, you mentioned SPX can hit 880 without changing the pattern.


  4. ollie, two EW rules:
    - the 3rd wave cannot be the shortest wave
    - the 5th wave is the smallest wave in an ED (thus the contraction towards an apex)

    Using my data feed on the spx, I have the following data points:
    End of Wave B: 766.03
    End of Wave 1: 833.04 (Diff of 67.01 points)

    End of Wave 2: 779.74
    End of Wave 3: 845.72 (Diff of 65.98 points)

    End of Wave 4: 814.80
    Add 65.98 points (but in theory it should be less than the size of Wave 3) to determine max size: 880.78.

    And there you have it. Of course, I use the Fib extension tool to figure it out very quickly, but this way you understand the underlying math.