The Market Pulse

The market appears to have hit a bottom today at 1230.25 which was just points above the .382  retracement (1229.25) of the swing between May 2011 high of 1367.25 and the July 2010 low of 1006. Notice that prices are retesting the neckline of the Head and Shoulder pattern.

From a 20 min perspective, I've identified the low as w.iii circle, implying that I'm looking for w.iv to the upside, followed by a fully retracement. However, it's often difficult early on when deciding with absolute certainty which wave is the extended wave. Final reconciliation of the count will be influenced by the depth of the retracement from the 1230.25 low.

Most recent price action has been identified as a double zig-zag that should push higher to 1271-73 range with 1273 representing a .382 retracement of w.iii circle. There is also resistance at 1262 that could cap the rally but I believe the higher probability exists where w.y =w.w at 1271.75.

Tomorrow is the Jobless Claims and Friday is Non Farm Payrolls. I'm sure everyone will be looking for further evidence that the economy is on weaker footing. It will be interesting to see the extent of the bullish resolve to push this market higher in the face of strong headwinds.

Best of Trading

The Market Pluse: An Interim Report

With two trading days in the books, heavy selling pressure has finally eliminated the alternate bullish running triangle interpretation for the Emini SP. The key area of critical support (1252.25) has been decisively broken leaving only bearish interpretations.

While today's close was fulfilling , in that the 2007-2011 analogy continues to provide a road map for anticipating where the market is headed, I would be remiss to inform readers that post pattern behavior is really important. The following chart is one of the two bearish interpretations. Where w.e actually ended is not locked in as of yet but it's really not required for the discussion below. What is, is the break of the lower boundary line and w.d.  

What I mean by post pattern behavior is that price has just broken out of a triangle and subsequent price action should confirm the pattern i.e. prices should swiftly decline in a thrusting manner with a minimum measured move in length equal to the widest length of the triangle (w.A). That would imply 1219.25 yet further potential exists to 1166.75 if you're viewing the pattern as a classical H&S. Should price action not react as the pattern implies, then something may be wrong with the analysis or the count itself.

Keep in mind that trading is like playing pool. If you've ever watch great pool players, they set up the table for their next shot. That's what we're doing now. First confirming that the analysis is right, then aligning with the trend.  In the coming days we'll eventually see a counter trend move that should be a great set up to ride the trend in the largest move down.

Tomorrow we have the jobs report. Given the dreadful economic news of late, a bad report could cause more technical damage to the market. We'll see what happens.

Best of Trading