Monday, October 19, 2009

Overthrow In The Making

With the positive earnings news out of Apple and Texas Instruments this evening, it is beginning to become a foregone conclusion that markets will test the upper limits of the ending diagonal triangle formations. For the Qs the upper limit for the current wave count is 45.43 with the likely target range between 44.07 and 45.05. For the SP500 the upper limit for the current wave count is 1121.59 with the likely target range between 1103.49 and 1121.59.

If the upper limits are exceeded then the next best count would be that we are in wave c of 3 with waves 4 and 5 of (C) yet to come. If we were to see an explosion in volume and breadth over the rest of this week, with ending diagonal limits exceeded, then we might be drawn to the conclusion that the markets are in wave iii of 3 of (3) or (C), a very bullish outcome indeed, though not likely at this point.

I think a wait and see attitude is best at this point with the following exception: an exhaustion gap or large range day that fails to break above the upper limits of the current wave count would be an excellent low risk shorting opportunity. If it occurs, I intend to take it using the QID and the TWM. Stops should be placed just above the upper limits around 45.60 and 1125 (and equivalents for the traded ETFs). I want to give it just a little room in case I've made a calculation error. Of course, everyone should verify these numbers for themselves before taking a trade.

The giddiness that is developing is almost palpable, but take a moment and remember the palpable fear back in March of this year, and then think about what the most appropriate response is to the current market conditions.

1 comment:

dave said...

QQQQ within ticks of .618RT in after mkt