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Friday, December 18, 2009

Update on Minor Degree Count Options

This is an update of the charts and observations I made yesterday in this post: I'll Bring Home the Turkey If You Bring Home the Bacon

Here is the chart you *should* be trading

i.e. you should *not* be trading this mess with any substantial portion of your funds. I am sure some of you are with a small portion of your funds, and if you are not losing your shirt or doing slightly better than breaking even, congrats. If you are making big bets because you think you "figured this wave out" .... good luck to you.

So even though I have no preferred count at this point, and will not until we break out of this range, here is an update on the 3 most likely counts in my mind.

No favorites, just 3 possibilities out of a multitude of others.

But why am I focused on these as opposed to a count that shows either we already topped (ended P2) or a wildly bullish count?

Because the Dollar has broken trend. It is in rally mode and will rally for the next 4-6 months (past that I differ substantially with the long term Dollar bulls). But this is an important trend change. I find it very difficult to believe that the market will be able to maintain its rally mode in the face of this. However nothing goes up and down in a straight line, and the current rally in the dollar needs a correction. It is working on a 1 and needs a 2 pullback. The stock market will likely rally, albeit anemically, during the next short Dollar correction. But beyond that is wave 3 (Minor Degree) up for the Dollar and the market will quite likely react very negatively to this. And we must not forget the end of year rally. Erik has a well-thought out post for the reason behind the traditional December rally: USD trend change: When will it start dragging down the market?.

So that is why I am focused on this count variant: Either current consolidation or perhaps a pullback followed by one more technically weak higher high for the broad US equity market.

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