Friday, November 14, 2014

MTU Weekend Ed. - Topping Squiggles (11/14/14)

Tracking counts are completing on the upswing.  Negative technical divergences have persisted since the mid-upswing.  Market breadth has lagged and may have rolled over. See details below.

Chart 1 - A five wave upswing from the October low in SP500 is ending. Negative technical divergences have persisted since the mid-upswing.
Chart 2 - Wave v of (v) of the proposed upswing is also ending. If this past week saw a completed wave iv-down of (v)-up, wave v of (v) either failed Friday or is likely capped at the 2053-2058 area where wave v of (v) reaches equality with wave i of (v).   Chart 3 updates price actions in 3M in comparison to SP500, which appears to support our topping squiggle tracking.

Chart 4 - Breadth, a measure of market internals, has been lagging and may have rolled over.

Chart 5 - We track the current upswing as wave (5)-up of wave [3] or [C]-up , or part of and expanding triangle wave [4]-down from the 2009 bottom.  It should be noted that in the first scenario,  while prices have satisfied the minimum requirement for wave (5), wave one-five equality offers room to extend in both price and time. If so, the pending top would count as wave 1 of wave (5).

Chart 6 - The following tracking counts on SP500 from its 2009 bottom are inspired by comments from our reader, Mkt Man. While the larger structure remains the same as that in Chart 5, the proposed wave [3] or [C] offers some appealing features such as
<1> the alternation between the blue wave (2) and wave (4) during 2012 and 2013
<2> the alternation between the blue wave 2 and wave 4 (of either the blue wave (5) or the gray wave 1) in 2013.

Note that the tracking counts in Chart 6 can accommodate an expanding EDT gray wave(5) or blue wave 5 of (5), a megaphone pattern,  in SP500 which has been frequently noticed.

Let's see if SP500 could deliver an immediate overthrow or manage one after a wave B pullback.  See Chart 7 above.  

Time-based relations offer some insight.  The second upswing of the proposed expanding EDT lasted either 5.5 months or 7.5 months. Based on the time dimension alone, the upswing off the October low could last meaningfully longer than 5.5 or 7.5 months if the blue count tracks, and meaningfully shorter than 5.5 or 7.5 months if the gray count tracks.