Tuesday, January 5, 2010
Stock Market Should Continue Higher; Key Levels Cited for Rally Continuation
The short term S&P cash index wave count is not clear, mainly because of the sideways consolidation pattern that stayed in a channel instead of adhering to the rules of EWP's triangle formation. But it's still a consolidation that has now broken out to the upside so I'm calling it a B wave. If the count is correct in the attached S&P chart, then we're about to embark on a strong wave 3 of C that will be quite strong and fierce. It should charge toward the 1200 level, although this is just an educated guess at this point, before finding a top and reversing. As I said last night, thrusts from triangles are sharp and quick; but they are also terminal finishing moves that are quickly completely reversed. But note that the recent consolidation is not technically a triangle, although it sports the same type of psychology, so watching for post-triangle type behavior is warranted. This count is quite simple in remaining top choice, as long as the S&P holds above 1115 then it remains my primary count. A break below 1094 would mean I'd need to readjust the count and that possibly a top was in. A break below 1082 would strongly signal a top is in and that strong consideration should be given to getting short term bearish again.
The bulls know they have to make new all time highs in all the major indices to convince the public, and mostly themselves, that the worst of the credit crisis is over and the road to Dow 30,000 is on the horizon. So I expect a sharp sprint to the finish line of this marathon as the bulls throw in everything they got to shoot this market to new highs. But it will utlimately fail........miserably.
Nothing has changed for the EUR/USD and the US dollar. The EUR/USD should be on its way to a break beneath 1.4200 to complete its wave 5, and a complete 5 wave decline. From there we should get a sharp wave (2) rally. It is on that rally that I intend to re-establish my short EUR/USD positions again.
PLEASE NOTE: THIS IS JUST AN ANALYSIS BLOG AND IN NO WAY GUARANTEES OR IMPLIES ANY PROFIT OR GAIN. THE DATA HERE IS MERELY AN EXPRESSED OPINION. TRADE AT YOUR OWN RISK.