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Oct 22nd, 2010: Update 1 – Pre-Market

Posted by pugsma on October 22, 2010

8:30 am EST:  I have decided to make the final week of October “Free Week” here are PUG SMA, LLC.  I will leave all of the posts unprotected between now and Friday, Oct 29th.  I do this so that the readers can get a feel for what the Premium Intra-Day post are like.  Also, Tuesday Oct 26th, 2010 will market the 1 year Anniversary of the establishment of this blog.  You can read the first blog post here.  Interestingly (ironically) I began the blog right in the middle of 80 point correction in the SP-500 from 1100 to 1020 in late October 2009.  Could we be ready for a similar correction now?    This “free week” is a gift from me to all the loyal readers over the past year.  There have been over 1.3 million pages views since the blog began in on Oct 26th, 2009 and almost 800,000 views since June 1st, 2010 when I moved to this new Word Press home.  I want to thank everyone for reading and especially those that comment and contribute.  If you are interested in joining the Premium Service for November ($30 per month) or Nov/Dec ($50 or $25 per month, $10 savings), please drop me an e-mail at pu_gridiron@yahoo.com.

8:20 am EST:  ES Futures were basically flat overnight.  ES hit a high of 1179 (1183 cash equiv).

OK, my keep it simple stupid (KISS) model lasted all of 12 hours.  Ha!   I was discussing things off-line last night with one of my readers and we were looking at Ending Diagonal (ED) options.   It looks like this price action since the move off the Oct 4th low of 1132, could be an ED.  There are a lot of over-lapping waves that can be labeled as 3-wave moves.   So on the 15-min chart I added in the ED option (green trend lines) that I think makes the most sense.   The Oct 13th high of 1184 was wave i-(5) and the low of 1160 was wave ii-(5).  Yesterday’s day high of 1189 was wave iii-(5) and the low of 1172 was wave iv-(5).  This means there will be one more high in wave v-(5).  The minimum new high is 1190 and the maximum high for this wave v-(5) of the ED is 1202.  So I’m calling this my alternate count.  It would mean the top of this wave 3-[1]-P3 will end very shortly (i.e. today or early next week).

Another thing to keep in mind is that even though I expect minor degree wave 4-[1]-P3 to be a triangle, that does mean it would start off with a “bang”!   Remember the first drop of this triangle will be a minute degree (a) wave down, which is the largest wave of the triangle.  This (a) wave of 4-[1]-P3 could be a 40 to 60 point drop down to the 1130 to 1140 area.  This would relieve some of the over bought conditions on the daily charts.  From there the triangle would be range bound between 1130 and 1210 over the next month before the move to 1250 by year’s end to complete wave 5-[1]-P3.

So be on guard with your trading the next few days to a week.  The top of wave 3-[1]-P3 is likely near.  There should be another good buying opportunity to go long after the (a) of 4-[1]-P3 drop of 40 to 60 points.

FYI, if you want to read a good right up one why a top of this wave may be near (i.e. McCellan Divergences, etc.) go read Cobras blog post from last night, Two Top Signals.  I agree with most of what Cobra has written there.

SP-500 15-min chart real-time link: http://www.freestockcharts.com?emailChartID=23383f9a-e974-4567-9da8-cddcd7e90027

SP-500 15-min chart (EOD 10-21 with ED option):

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