Sep 26, 2010

Hello traders!
There is so many scenarios now... it is crazy. If you search in Internet will some guys saying this is a new bull market the bears the bear market has resumed. And you can show evidence for both cases. I think in the next several weeks we will see the market choosing a direction and resolving of the sideway move UP or DOWN.
My goal is to keep it simple and that means stay with the market and follow the signals. Last several weeks I stayed with the market and I was rewarded:) So I will not try to predict just follow the signals. That is the philosophy of this blog.
So the big picture stays bullish until we see something else. The first chart is the weekly chart - MACD is above zero, the Histogram is still rising so intermediate term looks bullish.

But not the short term. We saw another sharp rise on Friday but the end result is better defining the divergences on the hourly chart (see third chart MACD multiple points of divergence). The same story is showing the TRIN and the McClellan Oscillator.

I think this UP move is near to its end(for the short term) and ready for a bigger correction 2 to 3 weeks, which will work out the overbought state and reset the oscillators. It can start on Monday or we can see another rise to ~10950 where a=c. The daily chart (the second chart) and the hourly chart are showing how this pullback could look like - the prices should find support near to the MA50 on the daily chart and we will see correction between 50% and 61,8% shown on the hourly chart. The correction should be followed from a sharp rally and MA50 should cross above MA200.

Elliot waves are not my primary tool, with 5 I mean to expect 5 waves UP.

Expect 50% to 61,8% correction.

We must keep an eye on the bearish counts. The bearish scenario is still not dead. It is shown on the charts bellow.
With the rise this week my A-B-C scenario is dead. If the bears take control, we will see the bear market resuming. How do we know that is happening? The correction which I expect in October will be deep and break the trend line(the first chart and the chart bellow the line connecting the last two lows) from the March 2009 bottom.

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