Sunday, October 10, 2010

S&P Futures: Week In Review for the week ending October 8, 2010

The e-mini S&P continues to march forward even as several indicators suggest that a top is immanent. While indicators can assist in building the bearish case, price ultimately will tell me when the market has truly made it's turn. Currently the market is within a few points from wave. 4 (red) of wave.1 blue. Elliott refers to the fact that corrective structures often reach the span of the previous fourth wave of  one larger degree. That objective is 1172. I certainly didn't think that wave.2 would reach such a lofty objective due to the fact the other high probability target zones existed well below this area. The bottom line is they were all exceeded.

As I mentioned in my weekly review for September 24, 2010, the US Dollar will need to terminate wave.2 before a significant top in equities can be put in place. I believe this to still be the case as the very mention of FED's QE.2 has added pressure to the upside for equities and commodities while hammering the dollar. Current market sentiment for the Dollar is just at 3% Bullish. So the "dollar down trade" is highly crowded. With the overhang of more easing, some other event is going to trigger the Dollar's turn.

Here's the Market's position at the close of the week.


Momentum: Remains OB on weekly and daily time frames. No turn down. 
 
Pattern: final wave.v of wave.c of wave.2
 
Time: No change from previous comment, "The weekly chart level, H-H time relationships indicate that momentum highs range between 6-8 weeks +/- 1 week. That indicates that the top of wave 2 should occur at the end of this week or the week ending 10/15/2010. In addition, L-H time relationships of 4-5 weeks indicate that a significant top should occur at the end of this week +/- 1week"
 
Trade Strategy: Remain flat but looking to establish a bearish position as momentum indicators and price confirm a top is in place.
 
 
Best of Trading

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