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Feb 15th, 2010: Who Let the Bulls Out?

Posted by pugsma on February 15, 2010

9:00 pm EST:  Here are a couple interesting patterns on the 60-min chart that may play out to support a new high on the SP-500 in the near term.  The first is the smaller diamond bottom reversal pattern shown in green and the second is the larger broadening top pattern shown in yellow.  The key area to watch is the 1097 pivot point on the upside.  Once this is cleared decisively, the move up could accellerate.

SP-500 Diamond and Broadening Patterns:

2:00 pm EST:   Today, I have a new take on things.  I’m changing my primary count back to indicate that I believe we have begun wave [5] of P1 for the SP-500.  That’s right, the final leg up of the cyclical bull primary wave 1 (P1) is underway.  Price targets range from 1180 to a maxium of 1277 with a time frame of late April to early June 2010.

The key to this new bullish primary count is interperting the move off the Feb 5th low of 1045.  This 1045 low was made with positive divergence to price for all of the classic technical analysis indicators (RSI, MCAD, and STO), see the classic daily candle stick chart with indicators below.  Also, after 1045 low was made, immediately (within the hour) a massive reversal hammer candle was put in.  This hammer candle was comfirmed with 5 days of follow-through with low lows and higher highs being put in.  Finally, the McClellan Ocscillator also has showed positivie divergence at the 1045 low and has sense rebounded to the zero line.  The MCAD histogram is postive and increasing (bullish) and the MCAD singal line is about to get a bullish cross. And the Slow STO has already had a bullish cross on the signal line.

SP-500 Daily Candles with Indicators (2-15-10):

Now looks take a look at the various time frame E-wave counts.  In the 5-min and 15-min charts below we can see that the price movement since the 1045 low has looked corrective in nature with a series of 3-wave moves.  The vast majority of E-wave bloggers are interpreting this price action as a corrective wave (ii) of 3 of [1] of P3 down.  They are all expecting a massive (iii) of 3 wave do unfold, but have been frustrated by the slow grinding upward price action.  My new primary counts interprets the 1045 low as the wave [4] of P1, which is an irregular flat off the wave [3] of P1 peark of 1101 (see the daily chart).  This wave [4] flat is in direct alternation with respect to the simple Zig-Zag (ZZ) of wave [2] of P1 back in June 2009.  Now back to the 5-min and 15-min charts, I have this move of 1045 labled as a leading diagonal (LD) for wave 1 of [5] of P1.   A leading diagonal is make up of 5-waves that can have a 5-3-5-3-5 structure.  I have labeled waves i and ii complete and wave iii has mapped out the wave 1-2 and has entered wave 3. Wave iii should reach 1085/90 and wave v of the LD could reach the gap at the 1092/97 area.  The top of the LD would be wave 1 of [5]. Typically a LD will retrace quite deep or at leat 62%/78%.  So I would expect a test of the 1045 for wave 2 of [5] of P1, that could reach the 1055 area (also where a gap up needs to be filled).  This deep wave 2 retrace for the LD is a key to my proposed set-up.  It will fool most tradersk, and the bears in to particular, into thinkg (iii) of 3 is underway and they will be full short on the market.  And when it turns around at 1055 and wave 3 of [5] of P1 begins, it will be initiated on a MASSIVE short squeeze complements of the bears.

The alternate count switches to the P2 count, where we are in the [B]-leg of a large A-B-C off the 1150 peak that will reach at least the 38% retracement area of 966.  If this alternate count is in play, then the [B]-leg is near completion and the [C]-leg down will look a lot like the expected (iii) of 3 of 1 of P3 the bears are expecting.  But it will bottom at P2 and turn upward in a new P3 bull leg eventually.

SP-500 5-min Chart (2-15-10):

SP-500 15-min Chart (2-15-10):

SP-500 60-min Chart (2-15-10):

SP-500 Daily Chart (2-15-10):

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