S&P Futures: Market Wrap for September 22, 2010

The upper targets have been achieved from my previous forecast of 1134+/- 1%. In doing so, several points of interest are: internals are weak; the NYSE ADV/DEC is diverging as price rallies; ROC and other short momentum indicators are beginning to rolled over. Sentiment indicators and the Put/Call Ratio appear to be signaling a reversal is near. Yet as of the close, we have no confirmation that a top has taken place.

The wave structure is mature but I can't rule out the possibility that price will not try to close the gap surrounding the previous 4th wave at 1158. Also, price has yet to reach the upper boundary of the channel. Tomorrow this line goes through 1151.25. It's important to note that extremes of channel lines mark cycle tops and bottoms. How you might ask? Because when a longer duration cycle than the one contained in the channel lines rolls over, curvilinear channels (not shown) also turn and prices quickly break through the chartists trend lines. The grey lower trendline is of significance. It was tested today and held leading me to believe that the upside is still viable. Should the market break the trendline in a convincing manner my assumption is that a major price reversal is founded on the fact that:

1. A long duration cycle has caused the effect and it will be quite some time before the previous trend is resumed.

2. A long duration cycle has a large magnitude associated with it and therefore the amount of price range associated with it should be significant.

For tomorrow, my trade plan is to scalp while waiting for confirmation that a tradeable top is in place. Don't forget to follow me on Twitter for intraday comments at www.twitter.com/elliottwavelive


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