Monday, October 4, 2010

Market Timing Update (10/4/10 Close)

[6PM] Thoughts regarding a potential triangle
Kmoney and a number of bloggers raised the possibility that we may be seeing a potential triangle in the making since around Sept 21.

A triangle is a possibility, perhaps less likely for three reasons
(1) The proposed triangle structure does not work for NDX and RUT
(2) The proposed triangle structure will be running for nearly a month when it completes - perhaps a bit too much? - but NOT if the April high is to be taken out.
(3) To a lesser extent and certainly not a deal breaker, the proposed triangle structure does work with SP futures, but the form of wave b and wave c is less straightforward - i.e.
wave b is a zigzag with a odd-shaped small triangle in the middle,
wave c is a zigzag with a pretty complex three in the middle

[4PM Stocks]
There's no resolution and initial confirmation so far regarding whether last week's high is the top or not. Last week's high remains a probable top.

The following discussion focuses on the bullish as well as the bearish count. However, both counts are current in sync with each other, as the best interpretation of the wave structure since the top is an incomplete zigzag (Chart 1 and Chart 2).

Bearish count - Last week saw the top. The market is at various potential stages of iii-down (wave degree to be determined later), depending on how nested the initial decline turns out to be.

Bullish count - Last week's high was [X]-up of ii-down of (v)-up.
The primary reason to call an incomplete zigzag in the bullish count is the squiggle lower low in INDU as indicated, making the rebound into the close corrective. However, that low is not confirmed by the rest of the pack. We'll know tomorrow if the low of this wave is already in.

Chart 3 and Chart 4 shows the larger structure in SPX and COMPQ. The low of wave (iv) is a critical support to the bullish count and it is a confirmation point for the bearish cont.