S&P Futures: Week In Review for October 15, 2010

The USD continues to be the focus whereas a bottom of W.2 may have been struck on Friday at 9:00 am est. Looking at the following charts we can see support buying coming into the market on volume at the previous w.ii circle. Furthermore, this aligns well with the commentary that I made in late September. If you would like to review it click here: http://elliottwavelive.blogspot.com/2010/09/s-futures-week-in-review-for-september_25.html

I am expecting some weakness in the Dollar for Monday as momentum indicators have turned down at the 60 minute chart level. Expect a three wave decline followed by a break of 77.355 that would confirm that w.2 had ended on 10/15/2010. Should this occur,  equities would be impacted.

Turning my attention to the ES_F market, there is an absence of 5 waves down. Therefore I must consider that price will reach a new high consistent with my down, up analysis made on Oct. 11, 2010. I have included two charts that show what I am looking for and what would signal that wave.2 top is in place. First, I've drawn a red line showing how a divergence between w. (iii) and w. (v) might be forming. Tops and bottom formations often exhibit these diverging signatures. Secondly, a chart of the SPX shows what I'll be looking for in terms of the ROC. Note the black bar that I have drawn in. This slightly higher bar would coincide with one last push up... again a momentum divergence from price. Aggressive tradeRs should be leaning against a completed wave count and these signatures with a tight stop. More conservative traders can wait for a break of the lower channel boundary. I'll try to identify both when they occur.

Here's the current market position for the E-mini's:

Momentum: Remains OB on weekly and daily time frames. Sideways. No turn down.


Pattern: final wave.v of wave.c of wave.2

Time: L-H time relationships of 4-5 weeks indicate that a significant top should occur by the week ending on 10/15/10 +/- 1week"

Trade Strategy: Remain flat but looking to establish a bearish position as momentum indicators and price confirm a top is in place.


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