The traditional McClellan Oscillator closed at 239.53 today which generally portends some sort of pause or pullback. Will we see a wild swing on the 18th as I indicated could occur on the anniversary of last year's September swoon and reversal? We will know soon enough, but with new NYSE 52 weeks highs expanding everyday, it is still hard to see how it could mark a final top in the rally.
The Qs traded as high as 42.48 today just shy of the 43.30 resistance level I have noted in the past. They don't have to hit that level, but have reached it much sooner than I expected. If that level was going to be the rally top in October, I would not have expected it to be seen so soon. If the Qs are able to take out 43.30 by early October, then all bets are off for a serious correction this fall. There will be pullbacks of course, but breaching that level convincingly would put the markets on a solid upward trajectory. I will be watching this level very carefully.
As a reminder, 43.53 is the 23.60% RT of the 2000 to 2002 decline in the Qs, 43.60 is the 61.8% RT of the 2007 to 2009 decline, and 43.30 is the July 08 swing low. So this represents a serious resistance level. Once broken, the Qs would be clear to make a run on the 07 high at 55.07 and the 38.2% RT of the 2000 to 2002 decline at 58.24. I know alot of traders may think that is crazy talk, but how many thought the Qs would be at 42.48 back in March of this year? Keep an open mind. The trend is still up.
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6 comments:
Craig,
We both failed to note something important last Weds 9/9 (and the tone of the mkt has changed since then).
When the Q's closed @ 41.09, they closed above the low on 3/17/08 (41.05) which was the bottom of wave 1.
Many who have been bearish since the March low have been looking for a new low (THIS year).
One hard & fast rule of EW is "W 4 never enters the price territory of W 1″ p 21.
By closing above the bottom of Wave 1 that would deductively label the March low as 5 complete waves to the downside.
Also, RUT joined the Q's Monday as having surpassed 50% RT of their bear mkt decline.
However, surpassing 61.8% (next) is a really big deal ... a game changer.
Last Thurs i was looking at an uncluttered (w/o MA's; studies etc) SPX daily chart & i thought that i might need a saliva test.
May, June, early July looked like an ABC wave 2.
Aug, early Sept looked like an ABC wave 2 of a lesser degree.
That would put us near the beginning of a 3 of 3. Even a somewhat mild, brief shakeout would not change that. If anything, a brief shakeout just before embarking on a 3 of 3 would be very befitting.
And surpassing/closing 43.60 would go hand-in-hand
I have had the same thought, but have been a little leery of accepting it just yet. So far, I have kept my greed in check and the idea of a 3rd of a 3rd could unleash the demon inside. Just kidding.
But seriously, this thing just wants to go up.
With regard to 41.09, I did forget to follow-up on that from my August 28 post. I think any correction should hold above that level. If we really think about it, the March low of 2008 is probably the level that most investors are referencing and to be back above that level is huge.
You're also correct that it eliminates one of the wave counts.
The thought that is currently germinating in my mind is that we are in wave primary wave C up of cycle wave b up in the Qs. The March 09 low was probably the end of primary wave B down of b. If this is correct, then primary wave C up could retrace a huge portion of the 2000 to 2002 decline. (I am using Prechter's notation here.)
So far, I haven't seen anyone considering this option, but it could lead to an incredible run in the Qs to the 61.8% RT at 82.02 - another double from current levels.
This is probably the most bullish interpretation I can foresee, but it is possible. The bears need to keep this in mind. 3rd waves and C waves are unbounded on the upside.
Another reason why the Q's & tech, in general may/should outperform other sectors is that they underperformed severely in the 2003-07 cyclical bull run.
Just from a replacement cap ex perspective businesses are using a lot of old equipment. OTOH, the financial sector, which was a big customer of tech, ... well, there's less of it LOL
"...greed in check and the idea of a 3rd of a 3rd could unleash the demon inside..."
Craig, stop drooling. Your shoes are getting wet. :)
Btw, that 3 of 3 view was not available to us before recently when the 2nd ABC wave 2 of a lesser degree formed. However, as in EW lingo it does have that "right look".
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