Friday, January 22, 2010

MTU-The broad U.S. stock market has topped (1/22/10 Close)

On this seventh trading day since I started my subjective countdown on 1/13/10 toward a confirmation of a primary degree trend change, the market has given us the initial confirmation of the top. The nominal topping dates are 1/11/10 (in SPX futures, COMP, NDX, Russell 1000, Russell 2000 futures, Russell 3000, DJ Wilshire 5000) and 1/19/10 (in SPX cash, INDU cash and futures, Russell 2000 cash).

In this particular case, a drop below the 11/16/09 high offers the initial confirmation of a top from a EWP perspective. The 11/16/09 high is the top of wave 1 of a potential five (in several indices) from the 11/2/09 low. A breach of this support confirms that the advance since 11/2/09 is a completed three-wave (A-B-C) affair, and in turn eliminates the possibility of the potential five.

Today, the 11/16/09 high is violated in all major indices with the exception of the small-cap Russell 2000 index, which may soon follow suit or may have diverged from the rest of the pack.

Chart 1 presents the wave count in the form of a triple zigzag of a completed primary degree rally in the ultra-broad Wilshire 5000 Index from March 2009 to January 2010, with the breach of the 11/16/19 also indicated.

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