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Aug 10th, 2010: Update 2 – Mid-day

Posted by pugsma on August 10, 2010

12:30 pm EST:  You can see that the SP-500 bounced right at the 13-day EMA of 1113 this morning, which is precisely what it’s supposed to do in a bullish configuration.  The 13-day EMA above the 34-day EMA bull cross happend in late July and since then the 13-day EMA has been acting as support.  Also, notice the bullish configuration of the 13-day EMA, 34-dayEMA and 50-day SMA moving averages.  They are stacked properly and running in parallel upward for bullish continuation of the SP-500.  So we really are at a important conjucture here today.  If this bullish moving average configuration can be maintained, then this SP-500 is set to run much higher as the primary count suggests.  If it fails and breaks down below 1102 to 1107, then the SP-500 will suffer tremendous amount technical damage for the near term and it will take time to repair it again.  So if the altenate count plays out and there is significant drop to at least the 1082 to 1088 area, then the SP-500 is likely to marred in a lower trading range for some time.

SP-500 Daily Candle Chart (12:22 pm):

12:05 pm EST:  The drop to 1111.58 this morning technically did breach the lower channel line.  This is always tricky, as the trend line can be shifted slightly down to accomodate the drop.  However, this bounce so far from 1111 to 1117 looks very much like a bear flag.  It’s looking more like a big sell-off could occur after the FOMC announcement.

So here are the counts:  For the primary this count the drop to 1111 was the c-wave of a flat for wave 2-(3)-3-[1]-P3.  So from the 1111 level the wave 3-(3)-3 would have begun.  This would require the market to launch to new highs above 1129 after the FOMC announcement.  For the alternate count, this drop this morning was wave i-C-2-[1]-P3.  Wave (5)-1-[1]-P3 peaked at 1129 on last Thursday, the drop to 1107 on Friday was wave A, the rise to back to 1129 was wave B, and today the drop to 1111 is just wave i-C.   The rise back up to 1117 to 1120 before the FOMC is a wave ii (bear flag) for wave ii-C and after the FOMC the SP-500 will drop between 18 to 29 points down the 1088 (iii=1.62i) to 1100 (iii=i) area.  The quadruple negative divergence on the 60-min chart agrees well with the altrenate count playing out.

This afternoon should be very intesting.

SP-500 60-min chart real-time link: http://www.freestockcharts.com?emailChartID=32c9590f-4f11-4554-9403-0ce66491fc0e

SP-500 60-min chart with MACD (11:50 am):

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