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Sept 30th, 2010: Update 2 – Mid-day

Posted by pugsma on September 30, 2010

12:15 am EST:  The latest AAII Sentiment Survey for Sept 30th is out and precentage of bulls dropped very slightly to 42% from 45% last week.  This would argue that more of a correction is coming, as this will need to get back down near 30% bulls to produce the next major rally higher.

Reported Date Bullish Neutral Bearish
September 30: 42.53% 25.86% 31.61%
September 23: 44.97% 29.63% 25.40%
September 16: 50.89% 24.85% 24.26%
September 9: 43.87% 24.52% 31.61%
September 2: 30.80% 27.00% 42.21%
August 26: 20.74% 29.79% 49.47%
August 19: 30.11% 27.42% 42.47%
August 12: 39.76% 30.12% 30.12%
August 5: 30.39% 31.37% 38.24%
July 29: 40.00% 26.67% 33.33%
July 23: 32.16% 22.81% 45.03%
July 15: 39.37% 22.83% 37.80%
July 8: 20.94% 21.99% 57.07%
July 1: 24.68% 33.33% 41.99%
June 24: 34.46% 33.11% 32.43%
June 17: 42.45% 26.89% 30.66%
June 10: 34.48% 22.41% 43.10%
June 3: 37.09% 22.07% 40.85%

11:45 am EST:  The primary count needs the 1132.16 level (wave ii-(3) low) to hold to remain valid.  However, with the drop to 1138.49 this morning the mid-channel support was broken and the 1137 pivot support was re-tested.  It’s still possible that the move higher in wave iii-(3) will continue from here, but less likely now.  We’ll have to watch the rest of today to see if the 1132.16 low holds up, which is also the IHS neckline area.

The negative reaction at the 1157.16 level this morning looks like it could be the top of the b-(2) wave for the expanded flat alternate count (blue) for wave (2).  Wave a-(2) was 26 points, so b-(2) should be 1.22*a = 32 points or 1123+32 = 1155.  So this fits with the b-(2) high at 1157 this morning.  The next wave c-(2) move will be a 5-wave sell-off of 1.62* = 42 point or 1157 – 42 = 1115.  The 200- day SMA resides at 1117 and the lower channel support is at this same area.

A 2nd alternate count (red) would be that the SP-500 reached the top of wave (1) today at 1157.  So now we are expecting a retrace of between 38% and 50% for wave (2).   The retrace targets 1113 and 1099 respectively.  This count would fill a lot of the open gaps left below.

Between the three counts, I favor the 1st alternate (blue) slightly over the primary at this point.  However, if 1132 or 1137 pivot support is held today then the primary count would remain my preferred count.

SP-500 15-min chart real-time link: http://www.freestockcharts.com?emailChartID=bcd4b12e-ef82-4045-8b32-7874eeb93ede

SP-500 15-min chart (11:30 am):

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