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Nov 4th, 2010: Update 2 – Morning

Posted by pugsma on November 5, 2010

11:00 am EST:  One thing I just noticed is that on the 60-min chart this wave up off the 1177 triangle (e)-wave low looks virtually identical to the wave up off the 1040 low of August.  That wave lasted 65 points (i.e. 1040 to 1105) before any significant pull-back.  This wave right now is 51 points.  If it is a minute degree wave (5) of 3-[1]-P3, as per the alternate count, then if (1) = (5), the SP-500 is headed for 1177 + 65 = 1242.  Hmmm…just above the ascending triangle target of 1232 and just below IHS target of 1251.  This would argue for the melt-up of this wave to continue.

10:15 am EST:   For both  counts, the levels I’m watching are 1225 (channel resistance), 1229 (wave v=i) and 1232 (ascending triangle target).

For the alternate count that this next high will be the end of wave 3-[1]-P3, the daily RSI above 75 and the daily price way outside the the Bollinger Bands (BB) would seem to indicate that this is a wave 3 of minor degree and not a wave 5 of minor.   Also the idealized minor wave 3 target  for 1.62*W1 = 1231 so that fits as well.   If this alternate is correct then a significant correction is coming after this next price high.  The minor degree wave 4 drop should hold above the 38% retrace of 1154 and could hold have the 23% retrace of 1182 (1177 pivot support).

If the primary count is correct we just keep slowing marking higher towards 1232 and even 1251 over the next 2 weeks.

Keep in mind that major bull market runs like this run from Aug 31 end on “Good News” and Sentiment Extremes (AAII:50% Bulls an 20% Bears for the past 4 straight weeks).

Good news this week:

1) Nov 2nd: Republicans sweep back into a significant majority in the US House.
2) Nov 3rd: Fed QE-II pledge for $600 Billion in new money
3) Nov 4th: Obama indicates that the Bush Tax Cuts could extended for Everyone.
4) Nov 5th: October Jobs Report Surprises to the Upside  at +160K.

This data could be used to argue for the end of either minor degree wave 3-[1]-P3 or wave 5-[1]-P3. 

SP-500 5-min chart real-time link: http://www.freestockcharts.com?emailChartID=6519e2ae-4190-418a-9409-810b92acff3f

SP-500 5-min chart (10:10 am):

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