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Feb 3rd, 2010: Lots of Options Out There

Posted by pugsma on February 3, 2010

11:45pm CST:  I want to put this chart up tonight, because one of my favorite comment contributors (Piotr) asked me to look at this potential Diamond Pattern on the SP-500.  The Diamond Pattern can mark significant tops or bottoms and it can also be a continuation pattern.  In this case he believes strongly that it will mark a continuation pattern for the US Markets. So for the SP-500, that means a signicant drop to yet come. Take a look at the 60-min chart below with the Diamond pattern shown. The measured move of the pattern is the height (about 37 points) added to the top or bottom of the pattern. If it’s a continuation pattern for this move down, then we have a target of 1038. Interestingly that coincides with my primary count for the large A-B-C target of 1035 (in red). But if the Diamond were to mark a bottom, the prices would reserve and the target is 1152. This could be the (3) of 3 of [5] of P1 (in blue) we have been discussing as the alternate bullish count. The key areas to watch are the pattern pivots at 1105 and 1090. If prices move significantly over or under theses levels it could signal the pattern direction.

60-min Potential Diamond Pattern (EOD):

4:20pm EST:  More and more possibilities both bull are bear are out there.  For the most part, my primary count (in red) on the 15-min chart as been playing out.  If we are still in a large A-B-C (5-3-5) overall correction down off the 1150 peak, then we are most likely in the b of B leg today.  B is tracing out a simple a-b-c zig-zag.  b of B is either complete at 1094 or has a little more room to drop (small triangle formed late today) to about 1090, before c of B begins and we should finish B in the 1115 to 1130 area now.  If c=a, then 1128 is the target.  If it’s a 62% re-trace then 1120 is the target.  And of course what comes after the B leg is the large 5-wave C-leg down to the 1030 to 1040 target.

Just keep in mind that my alternate bullish count (in blue) is gaining momentum as we stay above 1085/90.  This bullish count assume [5] of P1 is not done, and that we have already completed the large A-B-C corrective at 1071 for 2 of [5] of P1.  And we are beginning wave 3 of [5] of P1 which will take us to highs over 1150 later this spring/summer.  Notice, that on the Daily Bull Model Chart, this correction wants to stay above the Bear Trend Line that was crossed back in Nov 2009.   My assumption has always been when ever the correction comes, the Bear Trend Line will support it on the way down, whether it be 2 of [5] of P1 over P2.

5-min Chart (EOD):

15-min Chart (EOD:)

60-min Chart (EOD):

Daily Bull Model (EOD):

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