Thursday, December 17, 2009

Is the market about to fall apart??

That is the question we bears have been asking ourselves day in and day out. With the market gapping down to key support at 1100/1103 and being unable to fill the gap, the market headed lower reaching 1096, which happened to be the highest of the unfilled gaps that the bulls have left in their wake. On the 5 min chart, the move has all the right moves to make it an impulsive wave. Was it just another 'a' wave or was it the kickoff of p3? Unfortunately the market left us with a couple of scenarios:

- We are currently in a 'B' wave triangle and in the process of completing our final 'e' wave.

- The top is in and will be confirmed next week with a drop below 1080.

Let's take a look at the counts for both scenarios. It important that regardless of the scenario I'm looking for a move up to at least 1103 tomorrow before we move to lower lows.

This is the near term bullish scenario. We should still see a lower low after breaking at least 1100 to the upside. The perfect 'e' wave finish would be in the 1090/1092 area. From there we should get quite a reversal with a move to new rally highs. The move higher should be fast and swift. The minimum target is 1124 with maximum upside target being in the 1133 range.

This is the short term, immediate term, and long term bearish scenario ;-). We should have a wave 2 tomorrow. Once again it should at a minimum get to 1103. It could try and close the gap at 1108, but if it does that, then I am more inclined to think we are in the triangle scenario above. Once we move to new lows we should only get a slight bounce at the 1090/1092 area before completely collapsing as all those buying the triangle scenario get stopped out and reverse. This should be followed by several days of intense selling and a quick stop in the 990/1000 area to finish off our first wave 1.
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