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Jan 27th, 2010: A Very Bearish Alternate Count

Posted by pugsma on January 27, 2010

9:00 pm (CST):  A closer look at the 5-min channel lines.  Maybe a i-ii down for C-leg wave or a finish to (5) of A has started?  But if 1103.69 is taken out to the upside tomorrow, were are headed up in a B-leg towards 1115.

5-min Chart (EOD):

6:00pm (CST):  I wanted update my 15-min and 60-min charts to show that I don’t think this B-leg will re-trace more than to the 1105 to 1115 area.  And in fact the B-leg could already be in a 1103 from yesterday’s high.  Let’s see what the next two days bring.  But I’m not very bullish, even with the bounce today off the long term Aug-Nov support at 1083.  There was a key break of the lower limit 1085 of the Nov-Dec consolidation range today, as seen on the 60-min chart.  And remember what happened shortly after 1130 was broken just a few days go.  There is more down side in this market to come, and the 200-SMA is an attractive target for this correction.  So I’m still looking for levels down towards 1030 to 1050 before it’s over.  And if the key level of 1029 were to be broken, then we’re in P2 and head to targets in the 850 to 965 range (see the Daily Chart below).

15-min Chart (EOD re-vised):

60-min Chart (EOD):

Daily Bull Model (EOD):

3:30pm (CST):  Nothing was really resolved today with either the primary or alternate counts.  The bullish primary count has the fact that the 1083 level held as support.  The bearish alternate count has the decending triangle and a partial rise to 1099.5, wich on the bullish count could be a of B.   A break over 1103 to 1105 area is needed for the confimation of the bullish count and break under 1080 to 1083 is required for the bearish count.  Of course were bouncing between those to levels the past few days while Mr Market makes up it’s mind.  In either case, the market should be headed for fresh lows in Feb.  It’s just a matter of whether or not we get a bullish two day bounce for a high B-leg.

One thing in the bearish camp favor is that both the SP-500 and DOW-30 produced a bearish 13-day EMA cross over the 34 day-EMA today on a closing basis.  This has not happened since the July 2009 low of 869.  It almost happened during the Oct 2009 low of 1029, but it never crossed on a closing basis like did today.  If you trade exclusively long and short basis on this 13 vs 34-day EMA, you will be on the correct side of the market most of the time.

Daily 13 vs 34-day EMA Cross:

15-min chart (EOD):

9:30am (CST):   There is a real possibility that the B-leg of this large A-B-C correction has been put in at 1103.69 yesterday, 1-26-10.  If you look at my 15-min chart you can see that there is a potential decending triangle that formed after the initial drop to 1090 last Friday, 1-22-10.  This decending triangle could represent the B-leg and thus it is extremely bearish.  If the B-leg is in at 1103.39, then if C=A (60 points), we are looking at an agressive C-leg move to the 1043 (1030 to 1050) target area in the next week or two.  Watch for a “partial rise” towards the middle of the triangle at about 1093 to 1096 and a failure, which would confirm the decending triangle pattern be very bearish.  The bottom of the C-leg could challenge the Oct 2009 low of 1029.  And it would also push the SP-500 down toward the 200-day SMA that now sits at about 1010 and will be rising towards 1030 in the next two weeks.  This bares watching very closely.  There may not be a large B-leg bounce up to the 1115 to 1125 area as previously expected.

Of course the drop to 1085 this morning could also be the end of (5) of A and we do get the 25 to 35 point bounce for the B-leg towards 1115 to 1125 later this week.  A lot will depend on how the markets react to the FOMC meeting announcement and Obama’s speech tonight. 

So be watching for any bounce up to 1093 to 1096 are today and see how the market reacts.

15-min Chart (9:30am):

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