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January 18, 2009
Turning Points
By Andre Gratian
After a 6-week rally, we have started a new decline from 943. Where are we going with it? We'll let the charts talk!
The best analytical tool for structure is probably Elliott Wave (EW) analysis, but it is hardly perfect. Even very experienced analysts can disagree on what is the current market position. Its value is that it provides a look into the future which can then be substantiated by other technical tools. I will occasionally include the viewpoint of EW analysts, but verify them with my own analytic tools.
The intermediate trend is down. The EW consensus is that we just completed wave 4 of intermediate wave 3 at 943 and that we have just started wave 5. We'll go on that assumption and see if it is supported by future market action. If this is the case, wave 5 should take us to a new low. The move from 741 to 943 was a wave 4 corrective pattern (probably triangle), and we have now begun wave 5 and completed wave 1 of 5.
The indicators of the weekly chart are not contradicting this view. The top one has begun to turn down, and the bottom one should soon follow. As the index makes new lows, positive divergence should become clearly visible in both indicators.
The short term trend (daily chart) does not disagree either. Besides breaking its short-term trend line, the index has also broken below the previous short-term lows in what may be a first down-wave (of 5). There is some disagreement as to whether or not it is complete, but we'll assume it is. It found support on the backside of the channel out of which prices had briefly broken. We'll look at this more in detail on the hourly chart. For now, I want to point out that the indicators are not in a position to issue a buy signal, so we can assume that we should resume the downtrend after this correction is completed. If we are in a wave 5 and make a new low, the SPX has a potential to reach the projections given by pink horizontal lines.
The very-short term (hourly chart) is where we can really scrutinize the market action. Note that the first phase stopped on its top projection line which coincided with former support. The pattern was impulsive, and after a corrective phase the decline should continue, presumably with another impulse wave which will either be a 3rd wave (of 5) or the second wave of a zigzag.
The current uptrend should be of an a-b-c pattern, and it is. We are in the "c" wave going for one of the two projections which are indicated on the chart. With all the oscillators trending up, we are still in an uptrend until we get a sell signal.
There is a small cycle bottoming on the 22nd and a more substantial one on February 2nd. And, of course, we are expecting the 9-month cycle to make its low about mid-February.
I will follow this up in the daily updates.
Andre
[Andre's Turning Points daily subscription service can be located through his link in my "other sites of interest" listed at the right side of this page.)
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(Ed. Note: I've applied the Elliott Wave label to this post since Andre's update is incorporating Elliott Wave commentary - just be aware, my label automatically refers to Tony Caldaro as well, but that's a separate analysis and separate service from what Andre Gratian provides with his Turning Points markets analysis.)
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