Friday, September 21, 2012

MTU Weekend Ed. - Countdown (9/21/12)

Our assessment of the evolution of the Hope Rally, such as that outlined in Are we there yet (9/14/12) and in past weekend commentaries, has not changed.

The decline into Thursday’s low (1449.98 SPX) likely concluded a small degree wave [iv]-down as tracked by the blue count in Chart 2 in Are we there yet (9/14/12). Chart 1 below updates. A terminal wave [v]-up is likely in progress - barring a severe truncation (see EDT tracking in the Dow below) . In other words, the market is in a countdown towards the black point number 5 based on our Hope Rally model (Chart 2).  An interim high (and potentially a major high) is likely insight.

Interestingly, it is easier to track the very near term wave structure in futures (ES). The sell-off into Friday's close retraced the rebound from Thursday's low and approached potential trend line and Fib support (Chart 3 and Chart 4).  It counts as (ii)-down of [v]-up based on the bullish count (black), and the start of iii-down based on the bearish count (green) or i-down (black-alt).

It's also important to update the potential bearish EDT we have been tracking in the Dow.  Chart 5 shows the proposed EDT has already satisfied an overthrow.   If the final small-degree 5th wave does not extend, the market has already turned.  Meanwhile, the AD line associated with SP500 still diverges negatively (Chart 6). Hence, while there are other ways to count the advance as incomplete,  a breach of Thursday's low is likely a bearish indication at a larger degree.