From Brian
Hi there,
Here is some ramblings from the chart list on EW stuff. When a move is in its infancy, there is not a lot to say about it in terms of EW. But as it gets closer the its end, the potential EW paths start to narrow like they have now.
Last week, the two counts on the rally from the 788 low showed two potential paths from the top at 896. The 1-2-3-4-5 count of the rally suggested that the S&P would move down in an a-b-c decline before moving up, and the A-B-C count suggested that 896 was the top of the rally and the S&P would start declining impulsively from there. The action this week dismissed the A-B-C count for the move up from 789, as Monday saw a low within one point of the 50% retrace at 842 and then an impulsive rally that carried through the end of the week which left the decline from 896 as a 3-wave corrective decline. This suggests that 843 was the wave B (green) low and that wave C (green) is underway.
I've listed several targets for this wave C on the chart above, but there are also other possible targets now that this wave C has traced out some of its pattern. There are two counts of the rally from 843 that I can clearly see right now, and they are labeled in green and blue on the 15-min. chart below. These two counts carry very different potential paths for this wave C. The green count shows wave C one move up away from being complete, and may finish anywhere from 893 (which is below the wave A top) to 910 depending how long its wave 5 extends. The blue count shows wave C as having completed only its first move up, and it suggests this wave C will top closer to one of the higher target areas listed on the 60-min chart.
A clue in identifying the correct count may lie in Monday's action, and here's why. Friday's action traced out a Triangle, but it can be interpreted two different ways, which is shown on the 5-min chart below. One way has the whole move down from the 885 peak on Thursday as a triangle, which would be counted as wave 4 (green). Another way to count the move down from 885 has a Zigzag wave A which completed Friday morning, with a smaller triangle tracing out as wave b (both in blue). Since Triangles usually occur in the wave 4 or wave B position, both counts fit. The move at the end of the day could be considered as the start of wave 5 (green) or a throw-over wave e of the blue triangle. So, as I see it, what the market does on Monday will give the clue to whether this wave C is going to be short (the green count) or whether it will eventually end near one of the higher Fib. targets. A move down from Friday's close into the gap from Wednesday will make the blue count more likely, and a move up from Friday's close will make the green count more likely. When the S&P shows something that signals the rally's potential end, I'll show it on the 15-min chart.
Some of the technical charts are showing that this rally is ripe. The BP chart moved down a fraction yesterday – the first decline since the rally began. Its RSI is has moved above 70, and the MACD is showing a divergence. The Summation's RSI is also above 70. The A/D on the NYSE has yet to peak above the high from wave A. The NYSE Stocks Over 50 DMA is showing a divergence, as are the New-Highs-New-Lows chart and the Dow Transports & the Russell 2000. The weekly and the daily SPX charts are also showing divergences if the rally ends soon. All this suggests that this is in fact a wave C and not a wave 3. Wave C's show weakness and divergences, while wave 3's show strength.
stockcharts.com
All the Best,
Brian |
