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Aug 10th, 2010: Update 3 – EOD

Posted by pugsma on August 10, 2010

5:45 pm EST:  Even after the FOMC announcement this afternoon not much has been resolved in determining which count is correct, the primary or alternate.  Obviously, it only matters in the near term (i.e. next week or two) as both counts point to new highs above 1220 in the final months of 2010.   However, near-term I’m got to stick with my guns on the primary count wave 3-(3)-3-[1]-P3  wave call.  The lower trend line was held again today and the market reacted positively to the FOMC news of some additional Quantitative Easing now and low interest rates far into the future.  The target for wave 3-(3) is to break the 1131 level (inverse H&S neckline) tomorrow and move to 1150 by the end of this week.   I’m looking for wave 5-(3) to reach 1170 on or before OPEX friday, Aug 20th.  This primary count has going for it the bull cross of the 13-day vs 34-day EMA, the continued support above the 13-day EMA and closes above the 200-day SMA, as shown on the candle chart in my mid-day report.  If the market can maintain this positive bias, it will eventually resolve higher.

For the altnernate count, I can see the possibility of an ending diagonal for wave (5) of 1-[1]-P3 playing out.   Wave 1-[1]-P3 is a leading diagonal, so it’s fitting that it would end with a ending diagonal in it’s wave (5) position. Tomorrow there should be one more small pop higher in wave v-(5) to about the 1131 or up to 1134.  Beyond 1134 the ending diagonal wave (5) as labeled would be invalid.  I’m still looking for this alternate count to retrace deep in a wave 2-[1]-P3 correction to about the 1036 to 1069 area in later half of August.   The alternate count has going for it is all of the negative divergence built up between MACD and price on the 60-min chart.  But remember one big move up can wipe out all of these negative divergences.

SP-500 15-min Chart (EOD):

SP-500 60-min Chart with MACD (EOD):

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