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Feb 18th, 2011: Update 4 – EOD

Posted by pugsma on February 18, 2011

Sun 2-20-11, 12:15 pm EST:  You hear a lot of the perma-bear blogs talk about there being “no volume” in the  market to support the move higher in the SP-500.  Unfortunately, for the perma-bear blogs and there readers, many don’t understand the simplest aspects of Technical Analysis.  The On-Balance Volume (OBV) has been increasing (even going parabolic) with every step of this Primary Wave 3 (P3) rally off the July 2010 low of 1011 (see my daily candle below). 

What is On-Balance Volume (OBV)?: “A method used in technical analysis to detect momentum, the calculation of which relates volume to price change.  OBV provides a running total of volume and shows whether this volume is flowing in or out of a given security.  OBV attempts to detect when a financial instrument (stock, bond, etc.) is being accumulated by a large number of buyers or sold by many sellers. Traders will use an upward sloping OBV to confirm an uptrend, while a downward sloping OBV is used to confirm a downtrend. Finding a downward sloping OBV while the price of an asset is trending upward can be used to suggest that the “smart” traders are starting to exit their positions and that a shift in trend may be coming.” – From Investopedia

SP-500 Daily Candles (2-18-11):

4:45 pm EST: In a very impressive show of strength, the Bulls remain in full control through February OPEX week.  For the SP-500 today saw another new intra-day recovery high of 1344.07 a new closing high of 1343.01.   This wave 3-[3]-P3 has defied all attempts by the Bears to turn the train around.  We have dead Bear carcasses littered along the train tracks since the Bears were calling for a drop to 870 with the SP-500 trading at 1040 in late August.  Fortunately here, I was calling for 1250 by December 2010 (Hit !) and 1550 by Dec 2011 (Well on our way!).

For the primary count I have wave 3-v-(5) targeting 1351 (where w3=1.62*w1) and wave 5-v-(5) targeting 1359 (where v=i for the more up of 1275).  This should take the better part of the shortened trading week next week (i.e. markets are closed on Monday Feb 21st for Presidents Day).   Minor wave 3 of [3]-P3 equals minor wave 1 of [3]-P3 at 1360, so there is a nice confluence of targets near the key 1363 pivot resistance.   I’m expecting the minor wave 4 of [3]-P3 correction to play-out in March as a shallow triangle wave that holds above the 1291/1315 pivot support region.  And I have minor wave 5 of [3]-P3 heading toward the 1440 pivot in April/May (see daily chart for details).  Note: if minor wave 4 holds the 1315 pivot, the minor wave 5 equals 0.62 * minor wave 1 at 1431.  Again a nice confluence near a key pivot resistance.

Have a great weekend !!!    I’m going to enjoy watching my #11 ranked Purdue Boilermakers battle the #2 ranked Ohio State Buckeyes in West Lafayette, Indiana on Sunday (Be sure to tune in, as it’s broadcast nationally on CBS).   Boiler Up!   Stocks Up! 

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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