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Feb 4th, 2010: Keeping an Eye on the Daily Charts

Posted by pugsma on February 4, 2010

8:30 pm EST:  Just because I love alternatives and always like to keep and open mind.  Let’s say the move down ends here at 1063.  There is still an expanded flat option on the table for the B leg.  It’s shown is light blue on the 60-min chart below.  Here the math:  a of B from 1071 to 1105 (34 points),  b of B from 1105 to 1063 (42 points or 1.22a), then c of B would project as 1.62a or 55 points with a target of 1118.  This expanded flat would be what the market would do if it needs more time for this correction down towards the 1030 (200-day SMA) target.

60-min Chart with Expanded Flat for B-leg Option (EOD):

5:30 pm EST:  Surprise, surprise.  Ugly open and even uglier close.  Looks like the large C-leg down began in earnest today.  And from the looks of it, it actually began yesterday and I did not recognize it.   Looking at the 15-min Chart, waves (1) and (2) of C-leg were put in yesterday.  And (3) of C was in full force today.  I think we have a small amount of room below to drop to about 1055 tomorrow.  So there are two near term possibilities. There is room to the lower channel line left to drop to about 1055. That could end (3) of C and we get a weak (4) of C bounce into the 1070/75 area on Monday/Tues. Then (5) of C takes us down to the C=A target area of 1030/40 later next week (red count).  Alternatively, if this is near the end of the 5 waves of the C-leg down (C=0.62A, purple count), then we have have to finish C down to about 1055 tomorrow.  And we could start a major bounce up from there. That could make this 1055 area 2 of [5] of P1, which is a 78% retruancement of 1 of [5] of P1 that went from 1029 to 1150. This is a fib level and is a possibility for a wave 2, which like to re-trace at least 50% to 62% and sometimes as much as 78% of wave 1.  But before we call it wave 2 of [5] of P1, we’d have to climb over 1150 first.  So I should not get ahead of myself just yet.

Looking at the daily charts below, you can see how important it will be to hold the 1029 support if we are going to make significant new highs in 2010.  If 1029 fails to hold this correction, then I have to conceed that a much larger and longer time frame P2 correction is under.  P2 has the potential to take back anywhere from 38% (965 target), to 50% (908 target) to 62% (850 target) of the P1 addvance from 666 to 1150.

So watch the 1055 area tomorrow for some support and then watch the 1029 area later next week.

15-min Chart (EOD):

60-min Chart (EOD):

Daily 13 vs 34-day EMA Cross-over (EOD):

Daily Bull Model (EOD):

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