S&P: Daily Wrap Up for December 1, 2010

The current wave structure that I am labeling as w.4 is still unfolding. Today's large advance represents w.c of w.b circle. My expectation for the ON session or tomorrow's early trade is a slight advance followed by a partial retracement of the rally that ensued from 1172.25. The optimal retracement level is a .618, which is the most common retracement for each wave of a triangle. I'll post that level once I am certain that the current w.b circle had ended.

From a trading perspective, I actually prefer the triangle over a flat interpretation as a triangle gives a trader the added confidence in knowing that the structure only occurs before the final wave of an impulsive wave (either in a wave B or wave 4 postion). Currently, that's my fourth wave interpretation. So basically, should this interpretation play out, nobody is going to be wondering how high prices can go thereafter as the triangle signals that an end to the rally is near and calculating termination points for w.5 are relatively simple.

I've attached a chart that I presented  before depicting moving average compression. Look to the far right side of the chart. Notice how the three moving averages : 30, 10 and MOAD are still compressing as indicated by the blue circle! I think this techincally argues more for the triangle interpretation ratther than the flat interpretaion. However one should note that price always has the final say.


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

Cyclic Momentum: Weekly is neutral. Daily is bullish. 60 min. is OB.


Pattern: Either a triangle or flat correction for w.4

Time: 4 bars from high to high during the current corrective triangle w.4.

Trade Strategy: Remain flat until w.4 wave pattern becomes clearer. There are times to be aggressive and times to let a wave pattern play out before taking a position. This would be the time to adopt the latter and wait until one of the interpretations can be eliminated. I think we'll have our answer by the end of the week.

Best of Trading