Thursday, October 8, 2009
Key Levels Defined for the Short Term; October 8, 2009
As I stated in my last post, the rally today broke out to a new high confirming that the drop of last week was 3 waves. 3 wave moves are countertrend, so a new high above 1080 is likely. The evidence strongly supports this as we have a 5 wave rally (see above 15min S&P chart) from the 1020 lows and it was done on extremely strong internals for 3 days in a row.
Today's action was a thrust from a triangle. Normally when thrusts are complete they return to the apex of the triangle, which in this case is the 1053 area. From there I expect the market rally hard in a small 3rd wave that will break through the 1080 high with ease.
The only thing that will negate this short term bullish call is if this month's lows are broken at 1020 before the 1080 level is broken. Now with 3 days of strong rallying and internals and the thrusting of a triangle complete probably, I do expect some pullback. But I'm doubtful the market will be able to reverse strong enough and find sellers to push through the 1020 level any time soon. But if in the event this does happen, IT WOULD BE EXTREMELY BEARISH. EXTREMELY BEARISH.