Thursday, September 16, 2010

Market Timing Update (9/16/10)

[1122PM] Futures Update (ES)-
[657PM] ES >= Aug high.

[446PM] ES squiggles showing the structures discussed in the 4PM update. The ED (vs a regular five-up) option is still on, but is getting close to be rejected.

[4PM Stocks]
The most likely scenario, IMHO, is that
(1) The August high will be violated.
(2) The final consolidation of this advance is either still in progress or has ended.
(3) A near term pullback and a lower low is likely.

A final consolidation
binve has an insightful post, if, which has helped me address the debate(855PM entry) I've been having with myself regarding where wave iii actually ended.

Chart 1 presents the three top three near term scenarios.
[Red] Wave v of (c)[c]2-up is already in progress. Furthermore, wave v could be an ED.
[Green] Wave b-down of (y)[c]2-up may be an expanded flat with wave [C]-down to come overnight.
[Blue] An expanded flat wave ii-down of (c)[c]2-up is in progress with wave [C]-down to come overnight. This is the most bullish count within the context of a larger correction. If this is the case, the current consolidation would not be the final one.
[Extra] The discussion on the $TRAN (see below) counts the structure since the July low as a large zigzag. The current consolidation would be wave (iv) of [c]2-up.

I find it worthwhile to repeat the 1130AM Real Time Update, but have updated the charts to reflect 4PM levels below.

[1130AM] Thoughts on reconciling the small degree Dow Theory divergence between SPX and the DJ Transportation Average.

$TRAN has made a lower low, but SPX has not (yet). Here's a way to reconcile the divergence. Ambiguity remains as it does not conclusively resolve the near term bullish or bearish direction. The key element is which low (in futures or in the cash index) is the real low.

Given how high the low in $TRAN was on Aug 27th, odds seem to favor the low in the futures. If so, a fifth wave up / a fresh high is still missing.