Tuesday, April 27, 2010

Test given...bulls fail

I laid it out for the bulls, and they couldn't deliver. After looking at the 3 wave upward patterns out of our triangle coupled with today's price action, there is nothing left for me to label except a really weird ED. Although the relationships are not standard between 1:3:5 and 2:4, no rules were broken and everything had the look of 3 wave moves, so with that I've stuck a fork in it and called it done.

Now, let's move on to the meat of what today's price action is telling us: mainly that the market is ready for a move down. Is it the big one or just another 'correction' on the way to dow 30,000 as the media will be more than happy to tell you.

So here is what I have:

- If the down move ended right now or first thing tomorrow morning, then we have a clear wave 1 ending with divergence on the hourly chart, which is perfect. When ever wave 1 does end, we should find the end of wave 2 somewhere around the hourly 34 SMA. So I will be looking to add to my current short position around there whenever that happens.
- We need to get to 1172 to confirm a weekly reversal. Once confirmed, we should see multiple weeks of selling with no confirmed reversal to the upside. The best case is for this to occur during our wave 3. Likely wave 3 will subdivide so my degrees of trend may change.
- For this to show the likes of a serious move and the potential of P3, we need a monthly reversal. This would be confirmed with a move to 1077.
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