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Sept 14th, 2010: Update 4 – Afternoon & EOD

Posted by pugsma on September 14, 2010

3:25 pm EST:  As my primary count, I have wave v-(1) complete today at 1127.36.  I’m looking for a pull-back for wave (2) of between 1073 (62% retrace) and 1094 (38% retrace).  If this current aggressive move higher is similar to the Feb-Apr 2010 bull leg up, then the pull-back will be to 1094 (38%) to back-test the 20-day SMA.  The 1090 area is a key pivot to hold for the bulls on a pull-back.  After the back-test of the 1090 pivot, wave (3) will launch towards a level between 1170 and 1200.

In the alternate count, I have another high above 1127.36 coming.  I looks like there might be another wave 4 ascending triangle in the works.  I have never see back-to-back ascending triangles like this, but hey that is what it looks like to me and it a valid count.  The second ascending triangle has a target of 1127 + (1127-1116) = 1138.   Interestingly enough, there is key pivot at 1137 that should hold as resistance to any pop higher than 1127.

SP-500 5-min chart (EOD):

SP-500 15-min chart (EOD):

SP-500 60-min chart (EOD):

 

2:30 pm EST:  Here is VERY Simple technical analysis of why it should pay to start getting short the SP-500 in small increments as new highs are being made beginning with today’s high of 1127 and then wait 5 to 10 trading days to cash in.  The SP-500 this morning at 1027 was 45 points above it’s 20-day SMA.  This is near the highest level I can find anywhere on the SP-500 chart going back to the March 2009 low of 667.  This includes the tremendous rallies off the 667 low and the off the 869 low in July 2009.  Every time the SP-500 has advanced at least 25 to 30 point above it’s 20-day SMA it has corrected back toward it within 5 to 10 trading days and many times beneath it.  As you can see on the daily chart below, the SP-500 began at 1040 some 40 points below the 20-day SMA and is now 45 points above the 20-day SMA.  Even in the Feb to April 2010 rally there was back-test of the 20-day SMA once the SP-500 got about 40 points above it on it’s first pass through the 20-day SMA.  We have yet to have this back-test of the 20-day SMA in the current rally since Sept 1st.

Sure the SP-500 could climb to 1135 or 1150 in the next couple of days without a meaningful pull-back, but the odds are starting to heavily favor a pull-back towards the 20-day SMA very soon.  I think we see a wave (2) retrace towards this 20-day SMA near the 1082 to 1092 area.

Also, FYI the Nasdaq and QQQQ’s are even more ridiculously overbought above their 20-day SMA than the SP-500.

I will throw out one word of caution. This move since Sept 1st looks an aweful like like the move from early July to early August in 2009 that began the wave [3]-P1 bull leg run up to 1220.  That move lasted over a month and climbed 149 SP-500 points (i.e 869 to 1018) before the first meaningful pull-back to the 20-day SMA.  So far we have climbed 87 points in only 8 trading days!  It’s possible we could match that move, in which case we have 62 more points to go toward 1189!  Wow!  The other thing to remember about the 149 point move in July-Aug 2009 was that in came AFTER a failed head and shoulders the perma-bears thought was taking the SP-500 to a new low under 667.   That is the same thing that just happened on this recent test of 1040 and subsequenty rally to 1127!   The perma-bears were predicting a drop to 870 or lower as the SP-500 teetered on the brink of the large H&S neckline at 1040 in late August.  Bearish sentiment hit a extreme not seen since the March 2009 low.

SP-500 Daily Candles (2:08 pm):

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