Sunday, July 18, 2010

Weekend Analysis

Well I hope the information I'm going to share with you today proves useful. After reviewing the charts and the various indicators I use to help map elliott waves, I came up with a few items that have made me change my count. I'm going to lay out my bear count for you because it fits with my overall view and opinion of the stock market. I will lay out where price needs to go to invalidate my work. If that happens, then I'll see where the price action is going and provide my best forecast based on the data. So while there are alternate counts, what I'm presenting here is my primary count.

Key findings:

- The rally from 7/1 - 7/14 was stronger than the rally from 6/8 - 6/21; as measured on the RSI(5).
- The 2 above mentioned rallies were almost identical in terms of time, BUT were identical in terms of price (~87 pts VERY close to a fib 89)
- The 2nd rally was able to break price away from the daily 34 SMA
- Both rallies were turned away at the daily 50 SMA

Based on the above information, I determined that it makes most sense to count the 2nd rally as either wave C of minor wave 2 (irregular flat) or wave 1/A of a bullish move. Because of the bearishness of the charts coupled with what we know to be foolish notions of an economic recovery, I have put the bearish scenario as my primary count. Price needs to break away from the 34 daily SMA (currently at 1077) to lean me towards the bullish count.

With that said, I'm looking for a minuette wave 1 finish early next week with a 1 day rally to retest the 1070-1075 area for minuette wave 2.

My forecast from here is as follows (hopefully this will be valid for many months!):

- Minute wave 1 finishes in the 955 zone in 3-4 weeks (Mid August).
- Minute wave 2 finishes in the 1010 zone in 2-3 weeks (Late Aug / Early Sept).
- Minute wave 3 finishes in the 800 zone in 4-5 weeks (Mid October).
- Minute wave 4 finishes in the 850 zone in 3 weeks (Early November).
- Minor wave 3 finishes in the 650 zone in 5-6 weeks (Mid December).
- Minor wave 4 finishes in the 800 zone in 4-5 weeks (late January).
- Intermediate wave 1 finishes in the sub 600 zone in 6-7 weeks (late March).
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