(Update Wed 10/5/11 10:20AM EST)
Cobra (see my public links on the right) posted some great charts and stats last night to cover the odds for the next week or so. In aggregate, I think they support my thesis for 1 more low and then the strongest rally yet, but they also suggest the possibility for a higher low.
The morning ADP data is not very predictive, but it seems to suggest that the Friday jobs report won't be a huge surprise one way or another. Probably 0-100,000. Cobra always posts a chart before the jobs report showing that the intitial stock market reaction almost always gets reversed the same day. It didn't work last time, but I'm expecting this jobs report to either spark the final low or the final mini-rally into the final low per normal stats because it fits the technical setup. A bearish surprise could come out of NFP on Thursday morning since the last number was somewhat of an aberration at 391K.
The Fib 1.62 multiple that I mentioned last night has now been surpassed in the potential flat scenario from 1075. 1129 and 1135 are the 1.78x and 2x multiples. Today's small drop and new high opens up the possibility for a 1-2-3-4-5 count from 1075 in which case SPX may be completing wave A. However, the potential wave 4 drop only retraced about 20% which is borderline, and the rally appears to be wedging so the 3-3-5 flat from 1074 is also still possible in which case, the next downtrend is about to begin. Dropping below 1103 does not guarantee anything for the bears, but it puts the ball in their court. Breaking below the OEW 1090 pivot should seal the deal. Until then, anything seems possible. The US Dollar has dropped back to 79ish which is an ideal spot to kickoff its final wave 5 to 80-81 and cause a final bout of SPX selling. But, if we see USD selloff too much from here, the SPX bottom may be in.
Since most of my bottoming indicators have already triggered, my System and I will join the multi-week bull camp if (1) SPX trades down to 1050-1075 or (2) SPX consolidates or rallies for 2-3 days with USD weakness. In the former case, I will wait for a 2-candle hourly resistance break to enter long. In the latter case, I will wait for a sizable pullback to enter long. Good luck.
_____________________________
The machines rule.
Today's rally.
(1074.77-->1102.95) / (1079.32-->1125.12) = 1.625
3-3-5 flat with C=A*1.625 Fib?
I actually thought it was plainly obvious that the 1196 downtrend was over, so I didn't bother mentioning when DRSI confirmed that the 1196 downtrend was over before 1121 was even overlapped. However, Tony at OEW says the late-day rally was wave 4 from 1196 which will not be eliminated until 1150 is overlapped, so I guess it is worth mentioning.
Anyway, based on the my technical tools, there is a chance that the entire downtrend from 1371 is complete, but we never got a definitive washout and S2EW favors at least one more low. My 2 preferred counts are:
(1) A wedge from 1231 where wave 4/B was completed from 1371.
1231-->1136=1
1136-->1220=2
1220-->1114=3a
1114-->1196=3b
1196-->1075=3c
1075-->1125+=4
Technically, there is no overlap of wave 1 at 1136 yet, but it could still happen and 1114 was overlapped.
(2) A wedge from 1220 where wave 4/B was completed from 1371.
1220-->1114=1
1114-->1196=2
1196-->1075=3
1075-->1125+=4
In either count, wave 3 is longer than wave 1 in a diagonal triangle which strict Elliotticians may not allow, but there are plenty of examples to the contrary like the LDT to start the bear market in 2007. I only use 3 or 4 basic EW rules and DRSI. Using both counts for target estimates, w5=w1 at 1019-1030 and w5=w1*.62 at 1059-1066. Those targets will rise if SPX rallies above 1125. Both targets currently support the upper end of our original targets at the 1050s and 1010s.
Unfortunately, the 2 different wedge upper channels are currently much higher at 1165-1175. So, the counts won't be technically eliminated until much higher. SPX has already retraced 42% of 1196 and 35% of 1220. That's probably enough, but it could certainly retrace more. So, we're mainly looking for potentially complete corrective structures likely overlapping 1114 or 1136. Right now, we have a potential 3-3-5 to 1125. If SPX falls below 1103, the odds favor the rally is over. Until then, different structures could evolve. I don't know whether the Friday jobs report will cause a final capitulation or initiation rally, but it is shaping up to be an important day. Good luck.
No comments:
Post a Comment