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Aug 19th, 2010: Update 5 – EOD

Posted by pugsma on August 19, 2010

5:30 pm EST:  And the lastest bull vs bear battle rages on, but who will win the war?  Really it’s all about two key areas (i.e. necklines).  On the bull side, there is a large inverse head and shoulders with neckline at 1131, that if broken points up to a target near 1250 (new recovery highs) at year’s end.  And on the bear side there is a large head and shoulders with neckline at 1040 that points to a target of 860 (62% retrace of P1) by year’s end.  There is also a smaller bearish head and shoulders with neckline at 1057 that points to 985 (nearly 50% retrace of P1).  So as the bulls and bears continue to do battle here between 1040 and 1131, with the outcome still unclear.  But one thing is for sure, the winner of this now 3 month old battle is going to win the war and produce a melt-up or melt-down in price. 

It’s also not a coincidence that the battle is being fought near the Oct 2008 point of recognition line of 1105.  That is the area around1105 that the 2008 bear market melt-down really accelerated.  So, I still have this more narrow range of 1057 to 1105 that I have discussing late as my neutral range.  We are right back in the middle of this range tonight at 1075.  Advance is tipped slightly back in favor of the bears today, since we are close to the lower end of the range and are below all of the key moving averages (i.e. 200-day SMA at 1115, 13-day EMA at 1094, and 50-day SMA at 1089).  Also, today we got the bear cross of the 13-day EMA (1094.68) below the 34-day EMA (1095.74).   The bulls will need to reverse this bear cross very quickly by pushing back above 1105.

For the primary count I have today as completing waves i thru iv of (c)-2-[1]-P3.  I’m expecting a wave v-(c) drop to the 1056 to 1065 area tomorrow.  The 1056 area is the 62% retrace of wave 1-[1] up from 1011 to 1129.  And there is an outside chance it could drop to 1037 (78% retrace of wave 1-[1]).  The wave (c)=0.62(a) target is 1063 and the (c)=(a) target is 1040.  This primary count turns extremely bullish once this next low it put in.  And I think there will be a strong bounce up to toward the inverse head and shoulders neckline at 1131 in wave (1)-3-[1]-P3.  So watch  closely how the market behaves at this next low point.  Holding above the 1057 area would be very bullish.

The altnerate count is that we are working on wave v-(1)-3-[C]-P2 down.  And again the same targets from 1065, to 1056 to 1037 apply.  After this next low, a bounce up in wave (2)-3 could occur, but I don’t see it getting pased the 1094 gap from this moring, before wave (3)-3-[C]-P2 down gets going.  And you won’t want to be long for this wave down.  My initial target is the small head and shoulders target of 985, but it could be lower if the ultimate end game for wave [C]-P2 is 870 instead of 950.  We’ll just have to watch it closely if it starts to unfold.

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

SP-500 60-min chart with MACD (EOD):

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