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Jan 23rd, 2010: Aug-Nov Support Line

Posted by pugsma on January 23, 2010

3:30pm (CST):  Just to simply things, forget about the EW counts and bull vs bear, and take a look at the Aug-Nov 2009 channel. Higher highs and higher lows.  If you traded this channel over the last 6 months you be a lot wealthier today.  Will this channel hold up going forward?  We find out next week, as a critical level of 1080 is right on the horizon.

Daily Chart wth Aug-Nov Channel:

1:00pm (CST):  After a market chaning event like the 60 point (-5.2%) drop this past week from 1150 to 1090, it’s always a good idea to step back and check for some under-lying support.  I spent a few hours stepping back this morning to look at the longer term support lines from the late July 2009 to Jan 2010 rally.  There is a very important support line from Aug-Nov that is sitting right at about 1080 as the EOD on Friday, Jan 22nd.  It’s very possible this support line will come into play next week.  I expect this current 5-wave A-leg down to stop in the 1080 to 1085 area.  Assuming we get B-leg rally to about 1130, there are three scenario’s that I see.  Here they are in ranking order of bullishness:

Scenario 1:  This ABC correction has C=0.62A.  C ends around 1090 on the Aug-Nov support line.  This could then be a 2 leg of [5] of P1 and we move much higher into the summer.

Scenario 2:  This ABC correction has C=A.  C end around 1065.  This could viewed at the wave [4] of P1.  And we move higher in wave [5] of P1 into the summer.

Scenario 3:  The is ABC correction has C=1.62A or even C=2.2A.  We are looking at potential P2 drop to the 965 to 1040 area that last through most of the spring.

60-min Chart (Jan 23rd):

Daily Chart (Jan 23rd):

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