Thursday, September 30, 2010

Market Timing Update (9/30/10 Close)

[945PM] Perhaps sideways fourth wave action in EUR.USD for a few days -

[925PM] Futures update and thoughts on the bullish count -
The blue count (bullish) in the first chart below puts today's decline into perspective with respect to the larger wave structure over the past week.

From this perspective, it's no wonder that the blue count and the red count (bearish) are in sync. Tricky business indeed. So is the VIX wedge (chart to the right).

The key level is last Thursday/Friday's low as mentioned in the [4PM] update - 1117.25 in ES and 1122.79 in SPX.

[4PM Stocks and USD] Observations regarding the RUT in yesterday's EOD update and the price action in the RUT today have been helpful in identifying today's top.

Odds now favor a multi-week or multi-month top (Chart 1), now that we have a clear five wave decline from today's high (Chart 2, red) . However, the rebound from today's low does not appear complete (Chart 3, red) .

The top bullish count survives until 1122.79 in SPX is violated. Partial confirmation comes when today's low is violated. See Chart 2, blue. The main reason being that the 5-wave decline could be the tail end of a complex second wave retrace or the first part of a zigzag that is the tail end of a complex second wave trace.

As mentioned in the Intraday Update, the USD index likely needs one more lower low to complete its decline (Chart 4). The proposed additional decline could also truncate as it is wave five of five, but a lower low is norm.

If this scenario plays out, it would correlate with the proposed rebound in stocks well ([Y] of ii-up in Chart 3).