Monday, November 16, 2009

My preferred scenario played out quite well

In my weekend analysis I said that my preferred scenario was "A gap higher with follow through to new rally highs (wave 3 of 5)." While the market trended nicely for most of the day, it did hit some serious selling pretty early if it is going to reach its daily swing high price target (1128).

Now looking at the hourly chart, we are currently in wave 4. Looking at the 15 min chart; however, there are a couple of different interpretations to be aware of, and the top could be in.

Scenario 1
This is really the best interpretation for what we are seeing on the hourly charts: a running flat for wave 4. This gets the wave 4 into a better fib relationship with wave 2 (1:.786), and accounts for the steep selloff we experienced near the end of the day session. We should be near the bottom, and work our way higher tomorrow to a new high (or subdivide so we can get to our 1128 target by trending up the rest of the week).

Scenario 2
We have completed 5 waves already with an expanding triangle in our wave 4 position. While this shows up on the 15 min chart it gives no warning on the hourly chart. Tomorrow will be another sell off day as the market either makes its way to a wave B target (1080) or crashes through that target as we are currently in wave 1 of primary wave 3.

These last three charts show the possible progression for one last zigzag should the market hold support in the 1080 area. Like I said before, though, we have a lot of divergences show up and a dollar rally from here will blow 1080 right out of the water.


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