Wednesday, April 28, 2010

Flat Correction Complete, the Market Should Move Higher

S&P Cash Daily




The flat correction discussed yesterday appears to be on track. Today the Dow made a slight new low while the S&P did not. So aside from a very small and minor bullish divergence between the two indices, the Dow's rally from its low appears more impulsive than the S&P.


Today's Bottom and Rally in the Dow




Here is a close up of the Dow's potential five wave rally today. It's far from convincing, I know. The S&P does not follow this structure because its low was put in yesterday, and the rise from that low is in 3 waves. So there's some conflicting behavior here between the two indices in the very short term. But the evidence does support a move higher to new highs on the year because the recent rally to new highs that I labeled wave 'b' in the first chart, is a 3 wave advance. A 3 wave move is corrective, and since it made a new high it probably means it's part of a flat correction. Since we did have a bounce all day today, a new low beneath today's would make the wave 'c' of the flat correction quite ugly, and therefore less likely. So a break of today's lows in the Dow at 10,965 and yesterday's S&P lows at 1181.62 would put the flat corrective scenario in doubt. If BOTH those lows are broken then I would become short term neutral; but as of right now, I'm short term bullish for one final wave 5 push before a larger and longer decline occurs.


Nasdaq 100 Possible Head and Shoulders Top Forming??




Above is a 30min chart of the Nasdaq 100 showing what might be a head and shoulders top forming. This is very speculative since there's really no evidence of the right shoulder being printed, let alone having a right shoulder topping. But it's something to look for. It's possible the S&P and/or Dow will make slight new highs and the NDX will fail to do so, creating the projected right shoulder and creating a bearish divergence between indices. So if the lows in the Dow and S&P mentioned above are not broken, and the rally continues the rest of this week, watching the Nasdaq 100's structure compared to the other indices will be interesting. We may be able to look at the 2040 area of the NDX as a possible topping point for this index since that marks the topping area of the left shoulder, and perhaps the entire market will be topping when it reaches that level too. Just a thought, and something to watch.


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.

2 comments:

moola said...

Your prediction is coming true.We may see the Head & shoulder tops of all the major indexes on Monday, dragging another leg down to 50 day moving averages.Do you think a top is in already and how much down side is expected?

Todd said...

Hi Moola, I have a lot of data to pour over but should have a post up Saturday that addresses your question in detail.

Todd

StatCounter