Monday, September 28, 2009

Pattern Update

Well, one of the great things about EW is that you start with a list of probabilities and as the market unfolds you narrow your choices. So with today's advance on low volume, where do we stand?

Testing the 1000 area now has certainly been limited with today's price action. However, there are still a couple of scenarios that need to be considered.

First, let's attack the bullish formation and its implication on the pattern. We have so far a very clear impulsive move forming off of last week's low. However, 4 of the 5 waves appear to already be formed, and we've only reached the 61.8% retracement from the rally high. This is what should be troublesome for the bulls because past reversals were able to show much more strength this far into the pattern. Using our move to a rally high as our 'A' wave, and last week's low as our 'B' wave, I have shown several A:C relationships that could be in the works. With the amount of sellng that occurred near today's high and the lack of volume on the move up, we may be setting up for a failed C wave high. If the bulls are going to push the potential here, either wave 5 needs to extend or this move up is just a small wave 1 and after a minor dip we would see a powerful move to new rally highs by the end of the week. A move below today's low would move the pattern into the bear camp being confirmed with a break of last week's low.

Now, for the bears what do I see? We should test today's high tomorrow morning or during the overnight session. Once the test is in, we should quickly move to new lows and test the 1000 area by Wed.

1 comment:

  1. Hi Rich,

    I am waiting for your updates.