Thursday, April 22, 2010

Market Extended Correction Lower, Then Continues Uptrend

S&P Candlesticks




The market extended its correction lower this morning to complete the WXY double zig-zag correction I mentioned yesterday, then it proceeded with its larger uptrend with a huge surge higher this afternoon. Today's action creates yet another bullish candlestick on the daily chart as you can see in the above S&P chart. The bulls are in full control as any sell off in the past week has been stopped by the bulls and pushed higher. You can see this by the long wicks on the underside of the candlesticks in the above chart. It shows a lot of bullish support around the 1190-1200 level in the S&P. The bulls are still in control. For this bullish indicator to be invalidated, and to possibly signal a reversal in trend to the downside, I'd need to see a close beneath 1184. Until then, this candlestick pattern paints a bullish picture.


S&P Cash Wave Count on 5min Chart




The above wave count is not ideal, but inside a larger correction wave counts aren't often ideal anyway. Today we completed wave Y of a WXY double zig-zag correction that I have tentatively labeled a larger wave 2. We are now in wave 3 which means lots of bullish pressure much higher from current levels. Without aggressive buying tomorrow and early next week, it will call this wave count into question. But with declines falling in 3 wave segments and rallies unfolding in 5 wave segments, the larger trend appears to still be up. I don't feel this small correction this week was enough to fully alleviate the overbought condition of this market, so I doubt I'll get long anytime soon. A new high on the year probably just means the most recent rally is just extending a bit higher. A new high on the year in the S&P will stop my short position out and put me back to neutral, but I'll still be on high alert for signs of a reversal to get back in short.


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...

Todd, There is so much bullishness in the markets and the big reversal we are anticipating will come but i believe not until the S&P reach about 1300 some time in June. The cash from side line continue to get in to the markets.We may see a good employment report in May,that will thrust the markets in to June to reach a market climax prior to a big correction which might extend in to the fourth quarter.There may be another rally in to January 2010 prior to a market collapse. Just an educated guess. MP

Todd said...

Could very well be. I don't see anything getting in this market's way at the moment. But that can change in a heart beat.

Todd

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