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Saturday, October 10, 2009

This Week's Rally Review

Sorry to keep coming back to this, but I was just looking at the move last week in an old light and a new light and I wanted to share what I see. I am still sticking with the count and observations from these posts (Oct 9 - Count of Rally and Another Look at the Rally at the End of the Day) and wanted to throw in a few more.

First, here is the count I like since Oct 2

Here is another view of the count. This is a Renko chart, using Alphahorn's idea from this post of his. Renko tunes out the noise and shows the bigger wave structures, making them more identifiable. This helps to confirm my count.

I posit in the first chart that the action on Friday was far more corrective than impulsive. And I theorize that it looks more like a B wave overshoot. Many of the technicals seem to agree with that opinion.

Last is my 5-index chart (SPX, INDU, RUT, COMPQ and NDX). I always look at these together, because each is a major index with economy wide components (health care, financials, energy, consumer products, etc.) and so the best count (IMO) is the one that works on all 5. 99% of the time, I find this to be true.

Here is the note on the chart which is another indication of a Wave B move: More evidence of a Wave B overshoot here: INDU, RUT and SPX make a higher high than Oct 8 high, while NDX and COMPQ do not. This is an unconfirmed move, which is a classic wave B overshoot signal

Your honor .... I rest my case.

Now I am just a guy who is drawing funny lines on digital paper. Will the market respect what I think based on how I see things? Who knows.

But I think the evidence is pointing to a pullback on Monday and I think the apex of the Triangle last week (~1050) which is a 38% retrace is a likely target and I wouldn't be surprised by a 50% retrace down to 1045. We shall see :)
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