Monday, August 17, 2009

Next stop: corrective or impulsive?

Today's gap down below yesterday's low should have cleared up which scenario we were in from the get go. The price action today definitely had a wave 3 feel to it. What we'll need to keep in mind as the price pattern matures is whether or not we are looking at a larger impulsive move or another corrective wave.

So far everything is looking impulsive. Of course, all the bears know that one day's sell off can be reversed the next. What I would like to see is this sell off end in a nice clean 5 wave pattern. Certainly the breakaway gap is a nice way to get it going.

I'll be watching both the 8 SMA and 34 SMA on the hourly chart. I don't expect the 34 SMA to be solidly broken until this current wave structure is over. What I would really like to see is the selling pressure to continue tomorrow at the open and push this to the SPX 970 area. That would be a very nice place to end a wave 3 and allow for a normal wave 4 retracement before heading lower.


  1. Rich
    Why do you use 34 SMA on hourly for "support"



  2. The 34 SMA tends to break up the bigger wave patterns. Once price breaks through it, then the previous wave pattern is usually over. Since I don't expect this wave pattern to be over until we hit lower prices, so if we do, then that would put this pattern squarely in the corrective wave patterns, and I would expect at least one more higher high.