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May 17th, 2010: Another Wave Down

Posted by pugsma on May 17, 2010

4:25pm EST:  I called for a drop to a new low below 1126 today and it occurred as predicted. Both the primary and alternate counts were pointing to this new low below 1126. Today’s bounce off the 1115 level was bullish and we had a very bullish green close. Reversal candles were printed on all major indices. Both primary and alternate counts point to a bounce towards 1150. At 1150 the two counts diverge greatly. The primary count heads to new lows below 1067 for wave (3)-[C]-P2 and the alternate heads to new highs above 1220 in wave 3-[1]-P3. So the next day or two will hold the key to the intermediate term price action. The 13-day EMA sets at 1158 and should help separate the two counts as well. Today’s price action reminds me of the Feb 5th reversal that ushered in a 2.5 month bull run to a new SP-500 intermediate high.

SP-500 15-min Chart (EOD):

SP-500 60-min Chart (EOD):

10:00am EST:  Now that the cash markets have opened, I still believe that an additional wave down is required for both the primary and alternate counts.  The late Friday and early Monday move up can be counted as was part of wave-iv-(1)-[C]-P2 for the primary count with wave-v down yet to come.  And for the alternate count the move up cound be wave-b-2-[1]-P3 with wave-c down yet to come.  My targets are still in the 1120 to 1107 area for both counts.

Once this wave down completes, the next move higher is going to hold the key to the intermediate term SP-500 direction.  The 13-day EMA has moved all the wave down to 1158 and the 34-day EMA is at 1168.   So with the primary count, I don’t expect the next move up to get past this area before the next big drop down below 1067.

SP-500 15-min Chart (9:50am):

11:00pm, 5-16:   The ES Futures tonight have traded down to 1122.5 (1125.5 cash), which is a new low for this current wave down.  Remember what I said in my Friday EOD update:  “I think there is still one more wave down, wave-v-(1), yet to come early Monday. Since we have traded down to 1126, the next two logical points for this wave (1)-[C]-P2 to end are at 50% retrace (1120) or 62% retrace (1107). The large gap up from Monday is between 1110 and 1121, so that fits here too.”  Whether or not this new low holds into the cash markets tomorrow will be interesting. But 1120 and then 1107 are my cash market targets.

SP-500 ES Futures 60-min Chart (10:33pm EST):

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