Sunday, March 20, 2011

SP..would you buy this?

Not exactly a facetious question. The high at 1344, is just shy of the .76/ .78 Fib. retace resist, and the 14 week RSI, while overcooked at 75%, shows no negative divergence. However....

Active Mo. Weekly
click to enlarge
The A wave is clearly structured as a classic impulse wave down with an acceleration during the 3rd wave. The B wave looks like a classic zig zag 5-3-5 with c=.618 of a. Volume on the B wave up was poor often pathetic. The internal structure of the sub waves, particularly the -c- waves, had none of the characteristics of an impulse wave 3, arguing for  labeling the rally as a corrective B wave.
Within the abc up each -e- wave is .618 of it's respective -a- wave.
Note the "b" of B retraced .382 of "a".
So is it really over or will there be another iteration, a change of Elliott Wave degree etc? Strictly speaking a B wave CAN completely retrace the A and even then some.
The nature of the move down will reveal the answer.

Active Mo. Daily
click to enlarge
 Firstly the labeling on the sub waves  above could be done a variety of ways  and the larger picture remains unchanged. . It really won't matter.
Please note the multiple negative divergence on the 14 RSI
Thus far the move down off the highs has yet to reach the .382 retrace and it looks like 3 sub waves down, with last week's bounce a 4th.  If that count is correct and this is not just another abc down you really can't have it overlap the 1 at 1293 which would is also the .618 retrace of the potential 3rd wave. So looking for a 5th wave.
Stretching even for a .382 retrace of the "c"  will give it new lows and presumably a 5 wave structure. If it is beginning a major "C" wave down ,  impulse waves ought to be showing up.
Bottom line the bears need this to put in another wave down with new lows under 1241 pretty soon
On the downside taking out that 50% retrace on the daily chart will also penetrate the trend line up from 666...( no doubt quickly reversed the first time) and the damage will be done.






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