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Sept 18th, 2010: The Rest of 2010

Posted by pugsma on September 18, 2010

6:50 pm EST:  In sympathy of all the “frustrated” traders out there these past several months, enjoy this James song “Born of Frustration”.

9:30 am EST:  In my opinion there are two reasonable completing camps in regard to the SP-500 price direction going into the end of 2010.  And no, neither of them is the perma-bears P3 down count.  The two counts are basically my count that the P2 correction ended on July 1st at 1011 for 38% retracement of P1.  Or Alphahorn’s count that the P2 correction has not ended and the SP-500 is finishing up the [B]-P2 wave here at 1130 to 1150.   If I’m right we can expect a continuing bull rally of at least another 110 points to about 1251 by the end of 2010.  If Alpha is correct, then the SP-500 will suffer a 210 point decline down to about 929 (50% retrace of P1) going into the end of 2010.

Both counts are valid E-wave counts.  The key to my count is that on the next pull-back, the critical support around the 1086 to 1090 area must hold.  If those support breaks, then it’s very possible Alpha’s count is in play and a new low below the July 1st low of 1011 will occur this fall.  Also my count needs a decisive break above the 1131 inverse head and shoulders neckline to keep the positive momentum going.  One thing going in Alpha’s favor is the ES price action on Friday Sept 17th put in clear “shooting star” reversal candle.  The Sept ES Futures hit 1138 and reversed right at the key 1137 pivot resistance, then fell to ES 1122 and closed at ES 1125.  That is a 16 point topping candle as sellers jumped in at ES 1138.  This type of shooting star topping candle appeared at the April 20210 and June 2010 price highs and let to significant declines.  We now need to watch closely next week to see if any continued selling pressure is met with “dip buyers” above the critical 1086 to 1090 support.   If the “dip buyers’ come in and prevent the reversal, then my count for a continued rally into the end of 2010 will gain momentum.   If the SP-500 prints severl every large red distribution candles the next two weeks and the price moves under the 1086 to 1090 support, then Alpha’s count could be correct.

My count assumes the economy slugs along making small positive steps towards improvement going into 2011.  Alpha’s count assuming more signs of a double dip recession will show up this fall.  Both counts have very good E-wave fundamentals behind them.   Take a look at the ES Daily chart below to compare the two counts (mine in green and Alpha’s in red).

ES Futures Daily Chart (9-17-10):

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