Wednesday, October 27, 2010

Still Working Higher

Another added distribution day in several markets, but at the smallest degree of trend we do not see an impulsive move down. Yet, the action is not impulsive to the upside either as it appears that either the ending diagonal or some sort of triangle is coming to a conclusion. It seems that the money managers have been successful at keeping the rally going into the fiscal year-end for most funds, the end of October, but unless we see a blow out GDP report on Friday, one must assume that it will be a sell the news event, particularly as election day looms just ahead.

The NYMO closed lower and below the cited pivot level from yesterday indicating the rally is over for all intents and purposes. Anything they are able to do from here is window dressing.

We can't know what the extent of the decline will be ahead of time, but we do know that it will most certainly fit into one of three possible outcomes: 1) a large selloff to retest the July low to conclude a [B] wave flat correction, 2) a 4th wave correction to set up the completion of intermediate wave (1) from the July low, or 3) a 3 wave decline that sets up some sort or combination correction or triangle that extends well into 2011. Given the extent of the rally and the new highs by the Nasdaq 100, the likelihood of primary wave 3 down is very low at the moment. Only if we were to see a 5 wave decline to the July low followed by a 3 wave rally might we suspect otherwise.

Well, the monied interests have made a good run of it for a B wave, but I am looking forward to a better opportunity in early January.

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