10/29/11

The SPX closed Friday basically unchanged (less than a point up).  The Dow was only up two digits and not even above 50, which is flat by the standards of this run-up.  The Nasdaq actually fell.

The primary count is that this is Minuette (iv) of [c], which is more or less supported by Friday's action.  In particular, drastically overbought conditions from Wednesday's bull rush needed to be ameliorated.  Crucially, we have moved back below overbought on all of the 10-, 30-, and 60-minute timescales.

I have Friday's close as being Subminuette b of (iv), which shaped out a triangle.  Micro [E] of said triangle overshot, which is normal.  A gap down at Monday's open to around the 200-day SMA (1274) would look really good.

An alternative is that we're not that close to done with Minuette (iv) yet.  I've been looking at the run-up from late June to early July which closely resembles, on a fractal basis, this October run-up.  In early July we consolidated for a couple of days before one final push higher to the July 7 high at 1356.  I therefore wouldn't be surprised if a few more days of consolidation are needed, followed by a small push higher above 1300 but probably no higher than 1336.  The VIX is still above its .618 logarithmic retracement at 22.47-22.68, and its waves appear to suggest that it, too, is in (iv) of [c].

If more consolidation is required, my labeled Subminuette a and b might really be Micro [A] and [B] of Submin a.  Here Minuette (iv) would trace out either a flat, with a "b" up to the 1290s to come followed by a "c" back down to wherever "a" ends, or a triangle, which would be similar but of course have a "d" and "e" wave to follow.  This should probably keep the VIX in the 24-26 price range until (v) sends it down to sub-23.