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October 5th, 2011: Update 2 – EOD

Posted by pugsma on October 5, 2011

5:55 pm EST:  OK time to step back and take an objective look at things.  Since the Aug 8th low of 1101, the SP-500 has been range bound between 1100 and 1200.  We had a false break-out of 30 points above the range to 1230 in late August and on Tues Oct 4th we had a false break-down of 25 points to 1075.  So where we tonight after the close?  Yes, right back in the middle of the range at 1144.  So what does it mean?   It means that we still don’t know for sure which way the market is headed over the intermediate term.  Yes, there are some very bullish positive divergences that have appeared in the past 24 hours that have led to an impressive market rally of 71 points.  But is this just another count-trend rally or is it the start of a new intermediate trend higher that will break-out of the 1100 to 1200 range?  I don’t have the answer to that question, yet.  And beefore we get too bullish, we need to consider that the SP-500 price is still trapped underneath all the important daily moving averages (i.e. 13-day EMA of 1148, 34-day EMA of 1173 and 50-day SMA of 1183).    The SP-500 must close 2 consecutive days above the 50-day SMA of 1183 to confirm a bullish outcome of the intermediate trend.    And as you will see in the counts below, a move above 1196 will confirm the trend change.

So with all that in mind, let’s look at the two counts we have been tracking for well over a month and see what levels we should be watching to help determine the outcome.

For the primary (red) count I have slightly revised the count to label the 1075 low was the end of minor 1 of major [3]-PC of Cycle 2.  The current move up is a counter-trend rally for minor 2 of major [3]-PC.   The targets are the 62% retrace of 1150 and then the 78% retrace of 1169.  This type of aggressive count-trend rally is very typical of a minor 2 wave.  Also, you can clearly see on the 15-min chart that even a rally up to the 1168 pivot resistance keeps the SP-500 in clearly defined downward channel.  The SP-500 must rally past 1196 to invalidate this count.  Once the minor 2 wave is complete, we should see a very large minor 3 of major [3]-PC wave down towards 1011.  Ultimately, I think major [5]-PC of Cycle 2 will bottom near 934 or a 62% retrace of Cycle 1.

Now for the alternate (blue) count, I have labeled the recent 1075/1079 low  as the bottom of major [5]-PA of Cycle 2.  This implies an intermediate term trend change in underway for PB of Cycle 2 that should reach the 1250/1300 area by early 2012.  After PB completes there will be a PC of Cycle 2 wave down to the same 934, 62% retrace of Cycle 1 target by the summer of 2012.   The alternate count at the minor degree level shows the minor 1 of major [A]-PB completing in the 1150 area, to be followed by a minor 2 retrace to a first target of 1122 or a 38% retrace.  There are other minor 2 retrace targers at 1114 (50%) and 1104 (62%).  This alternate count will go invalid if minor 2 drops below the Oct 4th, 1075 low.

Support is at the 1136 pivot and then the 1105 pivot.  Resistance is at the 1168 pivot.

SP-500 5-min chart (EOD):

SP-500 15-min chart (EOD):

SP-500 60-min chart (EOD):

SP-500 4-hr chart (EOD):

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