The market appears to have hit a bottom today at 1230.25 which was just points above the .382 retracement (1229.25) of the swing between May 2011 high of 1367.25 and the July 2010 low of 1006. Notice that prices are retesting the neckline of the Head and Shoulder pattern.
From a 20 min perspective, I've identified the low as w.iii circle, implying that I'm looking for w.iv to the upside, followed by a fully retracement. However, it's often difficult early on when deciding with absolute certainty which wave is the extended wave. Final reconciliation of the count will be influenced by the depth of the retracement from the 1230.25 low.
Most recent price action has been identified as a double zig-zag that should push higher to 1271-73 range with 1273 representing a .382 retracement of w.iii circle. There is also resistance at 1262 that could cap the rally but I believe the higher probability exists where w.y =w.w at 1271.75.
Tomorrow is the Jobless Claims and Friday is Non Farm Payrolls. I'm sure everyone will be looking for further evidence that the economy is on weaker footing. It will be interesting to see the extent of the bullish resolve to push this market higher in the face of strong headwinds.
Best of Trading
The ON session printed 1264.25, just above 1262 resistance and has traded to 1240.25. While the decline is constructive, I'm not in any rush to say that w.iv circle is complete. A print below 1237.5, in five waves would be evidence that w.iv had ended and that w.v circle is underway.
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