Thursday, October 6, 2011

Market Timing Update (10/6/11)

[EOD] Stocks -
Powerful advance since the recent low. Chart 1 refreshes the top tracking counts on the 60-min chart.

(bullish) If the low is in, the count would be what appears to be a strong small-degree 5th wave extension (Chart 2, blue), or even something more bullish.

(bearish) However, such strong extension also opens the possibility of this advance being a corrective zigzag (Chart 2, red).

If so, this fits well with the potential expanded EDT-down possibility (to fresh lows) discussed in recent updates (Chart 1, red trend lines). It would also correspond to [E]-up of 5-up in VIX (Chart to the right). This bearish set up is invalidated if the market makes a higher high (1195.86 in SPX). Note that Transports is very close to making a higher high.

If the bearish scenario plays out, the next rally can potentially extend the Hope Rally to new highs - will expand on this in the weekly commentary.

[155pm] SPX squiggles -
Such extension opens the possibility of a corrective zigzag, note that the nominal low in NDX is where the red orth. low is marked in SPX.

[1135am] DAX, SPX update -
DAX closed at the high but did not manage a higher high today.
[830am] ES, DAX update -