Saturday, January 18, 2014

MTU Weekend Ed. - Overthrow (1/17/14 close)

Stock indexes made new highs this past week, with the exception of the Dow. As expected, the opening gap (down) at the beginning of the year has now been filled.

SP500 is likely on the way to deliver the potential overthrow which we have been tracking since the beginning of the year (Chart 1, green). With respect to the June 2013 low, the black count in Chart 1 offers room for a 5th wave extension. However, it’s prudent not to extrapolate too much given overall valuations of stocks.

From the retrace low on Jan 13th, SP500 has traced out a decent five wave advance and three wave decline (Chart 2). The retrace from Wednesday’s high counts as a small-degree wave 2 or B. It has also filled one of the two upward gaps during the advance. We expect a wave 3 or C advance next.