I analyze macroeconomic issues from a fundamental perspective, and I analyze market behavior from a technical perspective. Original macroeconomic analysis can be found here and both macro analysis and commentary can be found on my Caps blog. If you like or appreciate my analysis, please add yourself to my Following List

Sunday, December 27, 2009

More Thoughts on the Ending Diagonal Option

On Thursday I was showing that the Ending Diagonal option was still very much alive (And Just to Show You How Annoying the Market is Behaving). The pattern still looks good on both on Futures and Cash (this is not always the case. For example, the Triangle Option is much more clean on the Cash than it is on the Futures). On the E-mini, both trendlines are flatter than they are on the SPX, but both are converging and both do trend up.

The other compelling aspect to this count is the time factor. The 3rd wave of a diagonal or a triangle is typically the longest in duration and the most complex. And so when you see both the Diagonal and Triangle Options side-by-side like I show in my last post (And Just to Show You How Annoying the Market is Behaving), the Diagonal option is showing this trait, whereas the Triangle option is not.

As one last point, the Diagonal option for the SPX fits better with the timing of the counts on the other indices. For example, my count for the Russell (Heartbreaker) shows that we have one more down wave (4) followed by one more up wave (5) for P2. This would fit very nicely with the 4th and 5th waves of an Ending Diagonal on the SPX.

This is another case of many pros and cons to both counts and it is very hard to say which one is my preferred count. Just offering the group my thoughts as I have them.

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