PUG Stock Market Analysis, LLC | Technical Analysis Blog

PUG Stock Market Analysis is here to help with SP500, QQQ, IWM, Gold technical analysis, stock analysis and more.

Sept 19th, 2010: Is P1 Still in Progress?

Posted by pugsma on September 19, 2010

1:55 pm EST:  All the great discussion in regard to my Saturday Sept 18th post, got me thinking.  Maybe Primary Wave 1 (P1) is not over.  What if the April 2010 peak of 1220 was only major wave [3] of P1?  Here some things that have me thinking about this possibility:

  1. The Daily RSI (relative strength index) peaked during the April 2010 high of 1220.  The RSI usually peaks in wave [3], not wave [5].
  2. Wave [2] was a simple Zig-Zig back in May-June 2009.  The Elliott Wave guideline of alternation says wave [4] should be a complex corrective (i.e. triangle, double ZZ, etc).   It looks wave [4] may be tracing out an ascending triangle since the April 2010 high.
  3. The SP-500 has remained in the rising price channel (light blue) since the March 2009 low of 667.
  4. The wave [3] as previously labeled at the Jan 2010 high of 1150 was less in magnitude than wave [1].  Now with 1220 labeled as the wave [3] peak, wave [3] is 351 versus 289 for wave [1]. This is more typical of a wave [3] being larger in magnitude than either wave [1] or wave [5].
  5. A wave [4] likes to use time and much as price to correct the rise of the first 3 waves [1], [2], [3].  This wave [4] has been using time to move across the rising price channel.
  6. A wave [4] likes to correct back to the wave 4 of the previous degree.  The previous wave 4 of [3] is at 1045 and thus this wave [4] correction fits that perfectly.
  7. The P1 wave now has the “right look” with wave [4] re-labeled.
  8. If the July 1st, 2010 low of 1011 was P2, it only corrected 38% of P1 and last only 3 months in time.  This is a little too short in time and price for a Primary Wave 2.

So, if the SP-500 is currently finishing up a wave [4] ascending triangle, the minor degree D wave of the ascending triangle is completing here near 1131.  We should now expect an E wave maximum drop to a level of 1070.  But often times E waves don’t drop all the way down to the trend line, so the E could find support at the important 1107 or 1090 pivots.  Thus, the wave [5]  could be launched from anywhere between 1070 to 1107 on the next retrace.

The maximum target I have for wave [5]-P1 would be around 1359, if wave [5]=[1].  However, a more reasonable target is around 1250, which is [5]=0.62[1] and is also the large inverse head and shoulders target.  The ascending triangle target is also 1251 (i.e. 1131 + (1131-1011) = 1251).  I’m expecting the 1250 level to be reached in late 2010 or early 2011.

So what would this mean longer term.  It would mean that the actual P2 wave is yet to come some time in 2011 and that it’s going to correct much deeper and last a lot longer in time.  If P1 reaches the 1250 level in Jan 2011 (22 months), then P2 should correct between 50% and 62% (889 to 958) and last 11 to 14 months (Dec 2011 to March 2012).   This target area of 889 to 958 is a perfect spot for P2 find support based on the chart pattern.

So again, what to watch for?  If the SP-500 breaks down decisively below support on the next test of the 1070 to 1107 area, then the SP-500 could be correcting in P2 now and the targets are 870 to 950.  If the SP-500 holds support in the 1070 to 1107 and breaks out decisively above the 1131 ascending triangle resistance line (also inverse head and shoulders neckline), then a move to towards 1250 for wave [5]-P1 is likely underway.

In either case we are not in P3 up or P3 down right now.  Neither of those counts are likely at this point in time.

SP-500 Daily Chart Bull Model (9-19-10):

Sorry, the comment form is closed at this time.

%d bloggers like this: