Thursday, March 4, 2010

Pullback Before The Final Wave (B) Top

Today's action confirmed that wave [b] of Y of (B) up is in progress as the current action is clearly corrective and appears to be forming a small double zigzag as expected. It will be interesting to see how the market reacts tomorrow after the employment report, but it should be down. As long as the Qs remain above 44.60 to 45.00, we should expect wave [c] up to follow. If the Qs fall beneath 43.83, then wave (C) down is underway.

KKD failed to confirm its 5th wave up today but the 3/2 high might have been a truncated 5th wave, or a 4th wave may be in progress. In any case I would like to see it remain above 3.10.

Oil is nearing a correction as it is completing a 5th wave diagonal triangle. Oil's correction should move in concert with the stock market or lead it slightly based on recent action.

Gold is about to complete a double zigzag B wave up. Afterwards, I expect another choppy downtrend lasting 3 months or so. This is probably just part of an even larger correction, so intermediate term trading will probably not do well.

Silver on the other hand looks like it is ready to fall soon and perhaps dramatically.

Turns in dollar/yen have coincided with turns in the stock market over the last several months, although the direction has not always been the same. It looks like it is approaching a near term top that may coincide with the end of wave (B) in stocks.

Recently, there has been much talk about the SP500 failing to break above a downtrend line from the 2007 high. I don't know how others are drawing their trendlines, but by my calculations the SP500 broke above this trendline in November or December of 2009 depending on whether you use an arithmetic or logarithmic chart. At the moment it appears to be retesting this trendline before moving higher.

Last summer I posted an article showing how the Qs had already broken above the downtrend line and nobody was talking about it. In fact, I have yet to see an article or post by another commentator that shows that breakout. These kinds of technical errors can seriously mislead traders. We can't achieve perfection, but we shouldn't be sloppy either.

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