Friday, June 26, 2009

Chop chop and a ray of hope

As the end of month and quarter loom right around the corner, the market continued its corrective upward chop today. The one good thing that happened today is there is at least the sign of a potential pattern completion with today's high: an impulsive move down on the 1 min chart.

Now, 1 min impulsive moves aren't something that you can go out and mortgage the farm on. However, this impulsive move met my two criteria to making it worth noting:
(1) clear 5 waves
(2) take out the prior pivot high/low (depending on the direction)

This move met both criteria. Now while the move sports 5 waves, it is too soon to tell if the 5 waves are complete or just getting started. There can certainly be a gap down on Monday, but what I've shown here is that if the move ended right at the low point, then it could move up to a nice H&S pattern (I know its only a 1 min chart, but still it would be a good start).

We are also showing a nice possible double top on the 15 min charts (triple if you count the overnight session), so there is definitely sellers in this area waiting to unload on unsuspecting buyers.

So where do we go from here.

Possibly More Upside
The overhead area of 930 still looms. With end of month/quarter bullishness tendencies, I can't leave the possibility of a test of that zone out of the picture. To have a chance of getting there the market must open above 905 on Monday, although that guarantees nothing. Odds become significantly reduced that 930 will be reached with each of the levels outlined below being broken.

A Real Sell Off
During this whole rally, the bears have only managed minor corrections of approximately 53 points. This correction has already been the largest at 67 points. That fact alone should put the bulls on notice. This is also why the selling will really kick in with a break of 889.

My weekly low extreme target for next week is 844. The odds of getting there are significantly reduced w/o an open on Monday below 905. Should we open above that number, I'll be watching these key numbers for confirmation signals that the selling has begun:

Key Level #1 - Last Pivot Low: 913
Key Level #2 - Hourly 34 SMA: 906
Critical Level #1 - SPX 896
Critical Level #2 - SPX 889

After that we will have a confirmation below 879.

1 comment:

  1. Reasonable. Personally I don't expect a selloff until we get to July, perhaps after the holiday. ...Perhaps before.