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Feb 8th, 2011: Update 4 – EOD – Rising Wedge?

Posted by pugsma on February 8, 2011

5:00 pm EST:  Another great day to be a bull.  A new recovery high of 1324.87 was hit this afternoon and we closed right near the high at 1324.57.  If you just step back and look at the 15-min and 60-min charts, then you can see that the SP-500 has been running higher in a very steep rising wedge (green lines) since the Jan 28th low of 1275.  The pace of which is not typically sustainable for more that 7 to 10 trading days.  We have just completed day 7.  A rising wedge of this nature tends to collapse back to where it began (i.e. 1275 area).  Note, the rising 50-day SMA is at 1264 and the lower BB is at 1267.  Today was the 2nd day in a row the SP-500 closed outside the upper BB.   Notice what happen after Nov 5th during a similar back-to-back close outside the BB.   Wave 2-[3]-P3 began which brought the SP-500 back to the 50-day SMA and lower BB.

The primary count is that wave 4-iii-(5) complete today as an intra-day ascending triangle.  Wave 5-iii-(5) got underway this afternoon and has a triangle target of 1330.  From there a back-test of 1323 for wav iv-(5) and a top of wave v-(5) of 3-[3]-P3 around 1338.   A note of caution here is that this aggressive rising could exploded above the upper green line and turn in to a rising channel that would reach the 1363 pivot by about  Feb OPEX on Friday the 17th.  If this were to happen, then it should begin tomorrow with wav iii-(5) extending well past the 1330 target shown on my charts.  Recall one of my targets for iii-(5) from my EOD post last Friday (2/4) was where iii=1.62*i or 1348.

For the alternate count I have labeled today’s ascending triangle price action at wave iv-(5) and wave v-(5) of 3-[3]-P3 should complete tomorrow at between today’s price high of 1324.87 and the 1330 triangle target.  And a note of caution with this count is that wave v-(5) could truncate at any time now that the wave iii-(5) high of 1322.85 has been taken out.

For both counts, I’m expecting a wave 4-[3]-P3 retrace (about 38% of 3-[3]-P3)  back down to the 1275 area where the rising wedge began on Jan 31st.  I think this move lower will happen in the later half of February to early March.   From there wave 5-[3]-P3 should rise to the 1400 to 1430 area by late April to mid-May.

SP-500 5-min chart (EOD):

SP-500 15-min chart (EOD):

SP-500 60-min chart (EOD):

SP-500 Daily chart (EOD):

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