Sunday, September 28, 2014

MTU Weekend Ed. - Terminal Move 4 (9/26/14)

This past Friday’s low in SP500 likely marked the end of a month-long expanding triangle, one of the top scenarios which we have been tracking. The expanding triangle would count as a wave 4 or wave B off the August low. See Chart 1 red.

While a wave B can accommodate a meaningful wave C advance, a wave 4 suggests a limited upswing. The proposed 5th wave could very well fail as the minimum threshold for a full wave 5 is 2005.04 (Chart 1).

On the bearish side, the run since the 2011 low may have already ended at the September high. It’s possible that stocks have been tracing out a very bearish series of wave 1s and 2s (Chart 1, blue). However, the deep rebound this past Friday after a three-wave decline deserves attention. Secondly, one of our tracking counts on the advance since the 2011 low points to a timed topping window which is approaching, but not yet passed (Chart 2). Thus, it’s a good idea to view the next two weeks as a window where the market can sort things out.