Morning Update

With the market's decline from Tuesday looking corrective in some indices and the internals supporting that fact, today's rally looks like we'll be charging higher to new highs in the short term.  So we have to look at our next key levels.

As DH pointed out in my ELLIOTT WAVE FORUM, corrective waves often end at the prior fourth wave.  The prior fourth wave sits at 1173, and the 78.6% fibonacci retracement level (Elliott Wave Tutorial, 8.1) is just 8 points higher at 1181.  So to me, that seems like a good resistance area we can look for the market to struggle and perhaps top. 

In addition, according to Prechter and Frost's "Elliott Wave Principle: Key to Market Behavior", as a guideline, wave 2 usually retraces 66% to 81% of the preceding wave (p. 88).  If so, then the market is right in the reversal zone as we speak.  But with the strength shown today, I feel it will probably continue a bit higher into the upper end of that range at the 1173 - 1181 area before a top is reached.

While we may be looking for higher levels in the main indices, the S&P Small Caps, Russell, and XLF still sport nice bearish impulsive waves down with 3 wave corrections with some pausing at their 61.8% fibonacci levels (Elliot Wave Tutorial, 8.1).  So in these markets, EWP is unfolding perfectly.  Perhaps the main indices will push to new highs while these other markets/secotrs lag, creating a nice inter-market divergence into a major top.  We'll see.  In the short term though, the small caps and financials appear to be at some sort of top, whether it be short term or a major top.  We'll see how the action plays out the rest of the day. 

I'll post more later if more things develop.

So what do you think of these charts and my count?  Tell me in the ELLIOTT WAVE FORUM.  And don't be afraid to "let me have it" if you disagree.  I'm sure many of us would like a good discussion to help reinforce or answer questions about our current views.


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.