Tuesday, April 20, 2010

A Few Observations

AAPL is up after hours, but not nearly so much as one might think given the earnings results. It's possible that the action over the last 3 days is a small degree triangle that projects a top under 260. This may very well be a 5th of a 5th wave top. It often happens that a company's best earnings results occur at the top of it's run. We shall see.

The McClellan Oscillator failed to rise above the zero line today continuing to indicate that all is not well with the market no matter how great it looks on the surface. However, the market may work off this condition by consolidating sideways for some time. The key will be a deep oversold level in the Oscillator.

I count 14 stocks in the Dow 30 that are breaking down or that have broken down. I count another 4 or 5 that appear to be in 5th waves, some of which are ending diagonals, which portends some sharp selling. Nevertheless, the head and shoulders pattern that I posted yesterday appears to be busted, but we will probably only see a sharp 5th wave thrust before more selling begins. It may be prudent to sell short term longs on this thrust higher, which may only last one day.

Gold and silver look toppy. They may try for another rally high, but overall the pattern appears to have completed or be completing a double zigzag upward correction that should resolve to the downside. Wave Y down should take about 2 months putting the expected bottom in gold and silver around the first of July.

Is oil in trouble? Possibly. I would like to see it get back above 86.40 soon or a sharp selloff may be coming. I still think the intermediate trend is up, but the risk is increasing. One alternate interpretation is that the pattern since the 7/13/09 low is a very large ending diagonal triangle. If so, oil should stay above 76, preferably 80, and then we would see a final 3 wave upward movement ending in a thrust above 90. Afterward, a very sharp selloff should ensue initially down to the 7/13/09 low of 58.32.

After two really great years, I am having a very dull year so far. Sometimes success can go to your head. The elliott wave count has been hard to work out, and my expectations have gotten in the way. However, I know if I keep working and controlling risk the situation will resolve itself.

No comments: