10/17/11

Well, today was an interesting day.  We have gaps both upward and downward now.

I think we may still have a little upside before a downward move.  I have trouble counting the upward move so far as anything but seven waves, which suggests either {1} there is still another up wave to come, {2} we're in a flat and Minute [b] could and probably will retrace further than anyone thinks, or {3} I'm counting it wrong.

The breach of the 1150-1190 channel bottom (the purple line) strongly indicates that we are at least in THE wave (iv) of this move (rather than the "Minuette" wave (iv) I labeled on the chart).  Assuming, of course, that we are in either [a] of a zigzag or [c] of anything (or, if you must, wave 1 of a permabull count) and thus require a 4th wave proper.  The purple line crosses through the entire gap and 1230 all by 2 p.m. tomorrow.  Additionally, we stopped at just about the 1181-1190 trendline, which is amenable to (iv) having ended.

If the wave to follow is a retracement (either Minute [b] of 2, or wave 2 of a bull move), likely retracements from the current high are 1165-67 (38.2%), 1147-49 (50%), and 1129-31 (61.8%).  Of these I think the 1147-49, 50% retracement is the most elegant.  Provided it occurs by Monday (and I see no need for Minor 2 to last through the end of the year or any of that jazz), it would stay above the burgundy line that runs from 1074 to 1079 (though I question whether this line has any meaning at all).

For what it's worth, however, I see no need why the B wave retracement of this move must be shallow.  Yes, it would hurt the rallying feeling - that's what B waves are supposed to do!

If those calling this move [c] of 2 are right, the wave to follow will be Minor 3 and will make ground beef out of any bulls (which are likely to include several bears operating under the assumption that it's only [b] of 2, or that the Fed won't "let" it fall etcetera ad nauseam).