Tuesday, July 22, 2008
July 22, 2008; Closeup of S&P Flat Correction
Here’s a close up look at the 15 min S&P chart of the possible flat correction unfolding. Today’s strong rally at the end of the trading day looks a lot like a small wave 3. That would mean a small consolidation in a wave 4, and then one more slight rally to a new high tomorrow morning to complete wave 5. That should complete wave v of C of the flat correction and lead to a selloff.
Even if it’s not a flat correction and the market is not on its way to a new low in the short term, with five waves up from the lows complete, at least a correction to the downside is warranted. The technical strength behind the move down will tell us if it’s a B wave in a correction, or if it’s wave v on its way to a new low.
I may sound stubborn, but the larger trend is clearly still down, and the evidence does support the idea that a new low must be achieved to satisfy the preferred wave count. Another strong rally tomorrow and close on the highs will make a strong case that wave 1 down is complete, and no new low will be achieved in the short term. It would mean that a wave 2 rally is underway, and will take the indices to much higher levels. Tomorrow should be a very important day and tell us where the market will go in the next few weeks.