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Sept 20th, 2010: Update 4 – EOD – Break-out

Posted by pugsma on September 20, 2010

8:20 pm EST:  One of my subscribers asked what became of my alternate count from my weekend post that P1 could still be in progress; namely the wave [4]-P1 ascending triangle is finishing up and  [5]-P1 is just getting underway.  I have added this account as my first alternate (blue labels) onto the daily chart below.  And because I don’t want to leave my good buddy Alphahorn off the chart, I have added his count as my 2nd alternate (red labels) where wave [B]-P2 is completing here around 1170 and then the SP-500 will tank in a [C]-P2 wave down to about 950 (50% of P1).

Here is what to look for with the 3 counts:

  1. Primary Count: Wave (1)-3-[1]-P3 in progress.  Looking for shallow wave (2) pull-back to 1105 to 1121 and then a blast off to 1200 in wave (3).  Ultimately looking for wave [1]-P3 to reach 1250 by end of 2010.
  2. 1st Alternate Count (blue labels): Wave D-[4]-P1 ascending triangle in progress.   Looking for a quick reversal in Wave E down to 1070 to 1080, then a wave [5]-P1 up to 1250 by end of the 2010.
  3. 2nd Alternate Count (red labels):   Wave (5)-C-[B]-P2 in progress.  Looking for this wave [B]-P2 to continue to advance to about 1170 without any significant pull-back (that’s basically what’s been happening since Sept 1st).  Then wave [C]-P2 will begin a nasty 210 point crash down to 950 (50% retrace of P1) by the end of 2010 to the complete P2 correction.

SP-500 Daily Chart (EOD, Update with Alternate Counts):

4:45 pm EST:  The bulls forced a short covering break-out above the 1131 inverse head and shoulders neck-line today.  The SP-500 hit a high of 1144.86, a level not seen since early May 2010.  The volume was light to moderate and the VIX did not entirely confirm the break-out. 

This entire move off the 1091 low, now looks like an extended wave v-(1) with a pair of bullish consolidation ascending triangles used to break key resistance at 1110 and then at 1130.  It’s always difficult to call the end of a 5th wave, but today we do have 5 clear waves out of the 2nd ascending triangle.  I think with the FOMC meeting announcement tomorrow afternoon, there is reasonably good chance of a wave (2) pull-back to begin and head down to at least back-test the break-out 1125 to 1131 area.  There is a gap to close from today at 1125 and the 23% retrace target is at 1121.  The 200-day SMA is at 1116 and will act as support.  If the pull-back for wave (2) is deeper, then there are alternate targets at 1105 (38%) and 1095 (50%).   The 20-day SMA has moved up to 1091 and the 50-day is at 1095, both of which are in a bullish rising configuration, and will provide support.

On the 60-min chart, we can see just how impressive this wave (1) of 3-[1]-P3 has been.  It has covered 105 points in about a half a month since the August 31st, 1040 low of wave 2-[1]-P3.  The wave (1) of 1-[1]-P3 was 88 points back in early July 2010.  So this powerful wave (1) of 3 certainly fits with a 3rd wave scenario.  After the wave (2) correction, I’m looking for wave (3) of 3 to head toward 1200 to 1220.  And the ultimate for this wave [1]-P3 should reach the IHS target of 1251 by the end of 2010.

SP-500 15-min chart (EOD):

SP-500 60-min chart (EOD):

SP-500 Daily chart (EOD):

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