The Market Pulse: A Daily Perspective

On 12/13/2010 I wrote; "At the daily chart level, the ES_F came within 2 points of the 1.382 RF extension of w.4. As you know this level was cited as a level of significance. Today's high fulfilled the minimal conditions for a w.5 termination. However, looking at the lower 120 min. time frame, the wave structure implies that w.iii either ended on 12/13/10 or today. If the operative wave count is correct, i.e. as I have the chart labeled, then w.iv should end at 1233.75. Thereafter a final push to 1245-1247 should complete the structure for minor w.2. "

On Tuesday the ES_F barely managed to eke out an intraday high but failed to reach my upside targets. Regardless, the move fulfilled the requirement of completing the wave count. The subsequent price action and the lower close as well as today's trade may be the start of something big.

One should take note that the wave pattern from the 1016 has it's flaws. (See first chart - although most of  w.(A) isn't shown).  For example, w.(A) is much larger than w.(C). Secondly, w.5 of w. (C) is very short. Notice the level of 1306.25. This would be a more typical termination point. whereas w.5 = .618 {(w.1-w.3)}. So caution is still warranted here. I propose that readers keep a watchful eye on the following:

1. A decline below 1171 would negate any thought that there was more upside potential to this rally.
2. What if Tuesday's high was only w.1 of an extended w.5? That would imply a decline to the 1198 region, a .618 retracement of w.4. Should price turn up impulsively from there COUNT on a new recovery high.

Near term I believe that a decline is underway and should travel to at least the previous fourth w.iv circle (1219).


Here's the market's position at the close:

Momentum: Weekly and Daily are OB. 60 min is OS and turning up.


Pattern: W.(2) has completed or w.5 of w.(2) is unfolding.

Time: No analysis was made

Trade Strategy: The initial decline doesn't look impulsive at the moment. Wait for additional data points and wave structure clarity before acting. If this is really the beginning of a w.(3) decline, readers will have ample opportunity to ride an extended wave upon any minor intraday retracement.

Best of Trading