Monday, April 12, 2010

Will earnings deflate the bull?

With this morning's pop, we were able to take the ED right off the table. Based on the price action since the 4/8 low, we should be in a miniscule wave 4 (using my current degree of trend); however, price can't break 1191 for this to still be a 4th wave, so if it does, then that brings up two scenarios:

- Another subdivision with a wave 2 correction that ends somewhere in the neighborhood of 1180/1185
- The beginning of a substantial move down to at least the 1150/1155 area with much much more potential.

I'm looking to go short on any bounce after a touch of 1166. Why 1166 you might ask? Well, we have not been able to take out a weekly low since the Feb low. I like to use 1/3rd of the 10 period ATR to determine if a low has been substantially broken. Since the previous weekly low was 1175 and the 10 week ATR is currently at 27 that would equate to 9 pts. Keeping this going, we have not been able to substantially take out a monthly low since the March 2009 low. If we can touch 1087 that would be the 1st, so keep that in the back of your mind, as if this really breaks down, then I'll be looking to really add on positions on any daily bounce.
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