Saturday, November 19, 2011

MTU Weekend Ed. - Keep it simple (11/18/11 Close)

Intermediate term update

Stocks have met the minimum requirement for a counter trend rebound since the October low (Chart 1). The bust of a much discussed triangle may offer confirmation of another meaningful down-swing:
1] wave (3)-down  of [3]-down or [A]-down of cycle wave c-down  (Chart 1) or
2] wave (C)-down of [X]-down of a mid-term correction to the Hope Rally (Chart 2 blue).
3] wave (C)-down of [2]-down of a cyclical bull market (wave five) (Chart 3, blue).

It's probable that the decline since the October high may be a partial retrace of the October advance,  given the October breadth thrust and still shallow retrace of key international stock market benchmarks (see Hope and Resistance (11/11/11) ).  Chart 2 (green) and Chart 3 (purple, green) illustrate the potential  for another advance to recovery highs once the correction to the October advance is over.

Near term outlook
As it was the case during the Jul-Oct sell-off,  transports continue to offer more trackable wave structures since the October low (Chart 4).

With this past week's decline, stocks have now met the minimum requirement for a net partial retrace of the October advance (Chart 4, non-extended purple and green),  in terms of wave structure despite the lack of a lower low in many indexes.

Potential for a (much) deeper pullback exits (Chart 4, extended purple, blue, red).  In this case, the rebound off this past week's low is a small-degree wave B or wave ii rebound, which may or may not be complete (Chart 5).

This past week's low is likely a key pivot on the bearish side.  The high on Nov 15th is likely a key pivot on the bullish side.