Thursday, July 23, 2009

The market is going parabolic

Well, one thing you learn is that when the market fails to obey the technical indicators, then be prepared for a strong move in the opposite direction. Brushing off all the indicators, that is what the market did today. And it did it in a big way today as the 5th wave extended.

With the price rising today to touch the bottom of my primary wave 2 target, you have to be on guard for the ending of primary wave 2 when this is over. If we're going to get a zigzag for the final leg, then price should never drop below 930. If it does, then we may have seen all that the bulls could muster.

Certainly from a sentiment indicator perspective we've started to see the signs that the bear is ready to return.

Headlines like:

- "Dow 15,000, Here We Come: Stocks Going to New Highs, Lemonides Says"
- "Stocks Are Cheap! Bull Sees Dow 10,000 By Year-End"

are the kind of crazy articles people come up with closer to a top then a bottom. We should get at least a retest of the highs to finish off this wave structure before we begin a move down. Price should never dip below 960 before the retest. If it does, then we may have had a very short w4 already in, and either we'll have begun a minor wave B or the beginning of primary wave 3. It will be interesting to see if price spikes the same way in reverse.

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