Thursday, September 17, 2009

Right in the middle...

Well, we got our correction that I was looking for albeit from higher prices. The problem is that the bull/bear arguments have things I like and I don't from each. Here are the charts:

Bull Scenario
We finished the Y wave top today and also another X wave correction. Here's what I like about this scenario:
- The size of this X wave is identical to the last one.
- We get a clean test of the break out from the wedge.
- C=A*1.382 a common relationship during this bear rally.

Here's what I don't like:
- The impulsive move off of the bottom failed to clear the last pivot. If you've read my analysis enough, you know I'm leary of any impulsive looking wave that fails to clear the previous pivot.
- The dollar showed some strength today and is in jeoprady of breaking out of its bullish wedge. If this happens, equities will be weak tomorrow.
- All of the oversold indicators are there providing little reward versus the downside risk.

Here's the confirmation:
- We should see price break above the 1069 pivot high either in a gap above it or within the first 15-30 min tomorrow a.m.

Bear Scenario
We completed a larger wave structure (do I dare even put a primary wave 2 top - no way!) and will begin a test of the 1040 area. A solid break of 1034 puts the bull move in jeoprady and a break of 992 should seal it.

Here's what I like:
- Falling back beneath the breakout of a bullish wedge is Hugely bearish and should initiate all kinds of selling. The move down today was further than I expected and it left a nasty looking candle on the daily charts.

Here's what I don't like:
- The pattern is still 'open' if we are to complete a bearish impulsive move.
- Options expiration has been regularly bullish.


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