Wednesday, April 7, 2010

Market Timing Update (4/7/10 Close)

Stocks, VIX and Gold

SPX-The advance since the 2/5/10 low is most likely over at yesterday's high. This potential is discussed in Chart 2 of yesterday's update. Today's decline represents reasonable confirmation.

The most relevant issue is whether this peak is A of (Z) or the end of (Z) within a P2-type count.
We will likely get confirmation of either case till much later. Chart 1 shows three partial counts that is consistent with either case. I'll explore counts that support the current peak being the end of (Z) in the weekend update.

The initial stage of the decline also indicates potential for both possibilities (Chart 2). The red labeled count in Chart 2 tracks wave B-down of (Z)-up, whereas the blue labeled count in Chart 2 tracks a potential P3-type development.

If one is willing to overlook the overnight price actions in the futures market and focus on the cash index, it's possible that we still have a fifth wave up to complete post-triangle. The red labeled count in Chart 3 illustrates this scenario. If this is the case, this afternoon's low in SPX is most likely (iv).

However, the rebound from this afternoon's low still has SPX contained in the base channel (Chart 4). Given the tight risk parameters in this situation, the market still needs to prove that a fifth wave is coming.

VIX-The same observation can be applied to VIX. Given the strong rebound in VIX, a lower low within the current near term structure needs to develop almost immediately if there is a lower low (Chart 5).

Gold - Chart 6 shows my current count of gold. Gold may be on its way to a new high according to this bullish count. Relatively speaking, it's more difficult to come up with a high-confidence bearish count unless gold is tracing out a flat with the current advance being wave b-up of that flat.
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