Monday, October 18, 2010

Triangle Gives A Clue

A triangle has formed in the IWM, and this is a very important clue. First, it means we most likely have not completed the rally because a triangle always precedes the final impulsive move of the next higher degree of trend. Thus, if the IWM goes down tomorrow, it will then move higher to complete wave (v) since the down move will only be an abc correction. On the other hand, if it moves higher tomorrow, that move will be the last at the current degree of trend. Either way, we are looking at either a short term or intermediate term top by tomorrow or Wednesday.

The reaction to AAPL's earnings afterhours has not been positive, but unless it falls below 290, the 9/30 wave i high, we have to expect wave iv and v to follow to complete the current impulse. At that point, it will require a correction below the 9/28 low of 275 to confirm an intermediate term correction. If AAPL holds above 275 during the expected November/December correction, then watch out because a 3rd of a 3rd wave blowoff top will follow. If it does not, then expect several weeks, or perhaps months, for AAPL to build a new base before moving higher.

Whatever happens with AAPL will probably happen with the Qs, so we should expect new rally highs in the Qs before the correction begins. Then it should be down until well in December. Otherwise, we will be in a runaway market.

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