Monday, July 20, 2009

Wave 3 Continued to Extend...

The market has done exactly what it should have done to keep the bullish tone. Moved up and given very little back. We are however at the end of our minute wave 3 with an ending diagonal that must terminate before spx 955 to be valid. A drop below 948 should be all the market needs to get the selling going for a minute w4. While the most likely target for a w4 is in the 925-935 area, it could extend as low 915. However, any lower than that and the bulls risk losing all they have gained.

Expect our w4 to take about a week, before the bull resumes in w5. We should see some nice divergences picking up during w5 with a possible major selling point near the w3 highs and ending what I will be labeling minor wave w. This is where it will be make or break time for the bulls. The move down off of minor wave w should stay in the vicinity of our minute wave 4. Once again, the bulls risk losing it all with much more selling than that as we would have a well formed top in place.

If the bulls can hold this area, then they will be in position to move the market up to our primary wave 2 target beginning at 975 and ending at 1050 although certainly the market could go higher than that, but that is the most likely ending point based on fib ratios, resistance lines and trend channels. I will be looking for a primary wave 2 to end sometime between Aug 8th - Sep 8th, which will give the final leg 1-2 months of market time to finish off primary wave 2. All in all this will result in a 6 month retracement off of the 17 month bear market and my price and time targets will finally be met.


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