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Aug 18th, 2010: Update 5 – EOD

Posted by pugsma on August 18, 2010

4:50 pm EST:  Again the SP-500 tried to break through the 34-day and 13-day EMA area of 1097 and 1098 and failed again.  The 13-day EMA is within one point of a bear cross back under the 34-day EMA.  This would make the 13 over 34-day EMA bull cross from July 26th a “fake-out” and would be bearish for the intermediate term market direction.  The exact opposite happened back in July 2009 when we had bear cross “fake-out” followed by a bull cross that led to a sizable market rise from 869 to 1220.  Could this bull cross “fake-out” lead to a sizable market fall now?  It bares watchng closely.

For the primary count I have a pontential “failed 5th wave” v-(1)-3-[1]-P3.  The Nasdaq and the Russel-2000 put in a 5th wave higher put the SP-500 failed.  I’m expecting a retrace of back to the 1081 (62%) to 1085 (50%) area for wave (2)-3.

The first alternate count (blue) is now a variation of the primary count that says wave 2-[1]-P3 is not yet complete.  This count has wave (a)-2-[1]-P3 at the 1069 low.  Then wave (b)-2-[1] is the rise to 1100.  I’m expecting wave (c)-2-[1] to drop to the 1057 (62% retrace) to 1037 (78% retrace).   This count turns back very bullish after a test of the 1037 to 10578 area.  What is nice about this count is that it would fool the most traders.  As there would be big shake-out lower followed by an agressive rise higher.

The 2nd alternate count (red) is the bearish count that has wave 2-[C]-P2 complete at 1110.  We are now in the early stages wave 3-[C]-P2 down.  I have wave (1)-3 of this count targeting the 1037 to 1057 area.  This count has wave [C]-P2 headed to at least the 950 area (or a 50% retrace of P1).   This is my least favored count of the three at the moment.   But if we get below 1057 and have continued weakness this count is in-play.

Again, I stress that between 1057 and 1105, I’m basically neutral with respect the various counts shown.  Until we get a decisive break out of this range, it’s very difficult to say which direction the market is headed for the intermediate term.  The bulls still get the benefit of the doubt above 1057.  And since we are still in the upper half of this range, the bulls have the opportunity to push prices above 1105 and begin the next major bull leg higher.  However, so far they have stalled twice at the critical 1100 area.  Third time a charm?

The 15-min chart with MACD is showing some weakness, which is why I favor a pull-back to at least the 1081 area the next couple of days.

SP-500 15-min Chart with MACD (EOD):

SP-500 60-min Chart (EOD):

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