Monday, December 7, 2009

The spring continues to compress...

...with today's action. No solid gap up or down today as the market tested the 1110 (I sited earlier as the level the market should gap at or above to claim a wave 3) and failed...twice. The market decided not to play catch up with the USD while the USD consolidated its gains today. A resumption of the USD uptrend to test the 77 area should get this market to break key levels (mainly 1090). However, the move down tested the rising support line (seen in the bullish count chart), only to get pushed back by the bulls back into range keeping today's range to a mere 10 points. Unless we are in some type of complex b wave triangle, we should see a solid wave 3 push to the upside or downside tomorrow.

Bearish Count
While the market action on a higher time frame looks overwhelmingly toppish, this count doesn't imbue confidence in the bearish picture. I hate complicated subdivided counts like the one that shows up on this chart. Now, it is possible that have just completed an 'A' wave and we'll see another test of 1090 fail tomorrow, so that has to be in the back of your mind as price approaches that level. A gap below 1098 tomorrow should easily push to 1090/1092 before reversing should this just be another correction. But I definitely like a gap open at or below the 1100 area for a 3rd wave start.

Bullish Count
While the bearish count is messy, the bullish count isn't much better. Especially because prior 3rd wave gaps have been in the direction of the end of day momentum. As you can see from this 30 min chart, the EOD momentum sided with the bears. The key level 1110 remains as the level to beat for a gap open wave 3 acceleration to the upside.
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