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Feb 3rd, 2011: Update 3 – EOD

Posted by pugsma on February 3, 2011

4:50 pm EST:   Today played out according to the script, as the SP-500 dipped to 1294.83 in early morning trading just below my wave iv-(5) target area of 1298 for the primary count (white).   Wave v-(5) got underway late morning and continued to push to very near a new high at 1308.60 (old high 1308.85) in the late afternoon.    The consolidation today around the 1303 pivot looks like wave 4-v-(5) and wave 5-v-(5) took off from there.  If this sub-minuette count is correct then wave v-(5) of 3-[3]-P3 is just about to terminate above 1308.85 and below the 1315 pivot.  So tomorrow the primary count script would be an early “pop” and then a “drop” setting up a reversal day that needs to close under the 13-day EMA (1293) for confirmation.  The target area for wave 4-[3]-P3 is the 1257 pivot over then next 2 to 3 weeks.

However, the 1st alternate count (blue) just got real interesting today.  The drop to 1294.83 early this morning looks like a wave ii-(5) for this count.   Then in the after noon wave 1- iii-(5) completed today at 1308.60.  If this count is correct, expect a wave 2-iii-(5)  “drop” to the 1303 pivot support to come early tomorrow morning followed by a large wave 3-iii-(5) push up that clears and closes above the 1315 pivot resistance.   The intial target for wave iii-(5) is at 1348, where iii=1.62*i.   Then final target for wave v-(5) of this count is at the 1363 pivot to complete 3-[3]-P3.

The key to what tomorrow is how the market reacts to the January Jobs number.  An early “pop” may lead to a “drop” and reversal day for the primary count.   And early “drop” many lead to a “pop” for the alternate count.  Just keep a close eye on the 1291/1293 support and 1313/1315 resistance area.   A close below or over these areas, sets the direction of the next significant move to either the 1257 pivot (primary) or 1363 pivot (alternate).

I lean towards the primary count, becasue fo the larget negative divergences on the RSI (14) and MCAD on the daily chart.  As well as the non-confirmation the new SP-500 highs by the leading indices of the Nasdaq and Russel-2000.  The DOW transports continues to negatively diverge from the DOW-30 making new highs.  And finally the McClellan Osc ($NYMO) is negatively diverging with respect to the new SP-500 highs.  All of this says there should be a local “top” in this area.  However, negative divergences alone are not enough to call the “top” here.   The SP-500 could surge ahead 40 to 50 points in the alternate count and wipe out all these negative divergences.  Remember this is a minor degree wave 3 of [3]-P3 and the surprise move are always to the upside in a wave 3.

SP-500 5-min chart (EOD):

SP-500 15-min chart (EOD):

SP-500 60min chart (EOD):

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