Watching for equities rally to complete, like watching grass (or green shoots) growing, may seem like time standing still

Waiting for grass (green shoots?) to grow, paint to dry or water to boil, or file transfers to upload or download, seems to take forever when you're watching and waiting for it to happen. And that's what's happening with this leg of the bear market rally - that's why it seems to be taking a long time to work out! There are reasons to think that it just has not yet finished meeting its upside projections, as the rally blew upward from the QQQQ's 50% retrace level around $39 and now edging toward $43.30 around their 61.8% Fibonacci retracement level. There are similar levels for the S&P 500 and other equities indices. All while the dollar continues closer to Fibonacci support of its own. Today it dropped smartly again (ya-ay for equities of course!) to 76.00 which tickles back toward that chart price (prior swing low) of 75.89. Tony Caldaro has mentioned a Fibonacci target for it ... well, the Fibonacci levels marked on my charts are a big one at 73.58, although there is an intermediate one at 74.75. Charts for the dollar, and equities, are at right and below.

Then again - if you are daytrading, you've got to be loving the ChartsEdge daily maps, as today's map did another great job of pointing how today's intraday price movements would go!

Trader Brian (kalkgrun) has posted at the UBTNB3 side of the blog about the Baltic Dry Index and whether it can look yet more bearish. Good points! And it was at his recommendation that I added the BDI as an indicator on my weekly SPX chart, below - you can see it's showing negative divergence to the SPX price rise, even as the BDI is trying to keep its chin above its own 50 day moving average. Well ... divergence can last a while ... like paint drying, it can seem to take forever ... and then at one point in time, perhaps unnoticed - its job is done. Poof!

I've added McClellan charts with the oscillator and summation index for the NYSE (NYMO) and Nasdaq (NAMO), below. The oscillator definitely has weakened off, and that's probably another sign of equities getting ready to complete this small leg upward and then move into a pullback or consolidation. Only thing being, the summation index has waved upward again. And the oscillator can be getting moving average support to bounce upward again. Which supports the idea that equities don't look ready to go into a huge drop yet. So unless tomorrow's Fed provides a surprise wild card, it probably isn't time to bet the farm for "the big one down". More specifically - unless the SPX drops under 1063 and then 1057.46, any pullbacks or dips are likely to be temporary until it's completed a small-scale five waves up from the 1057.46 low.

Remember when we examined Martin Armstrong's currencies charts? That was a long time ago!! Back when we were looking at the Armstrong Economic Confidence Model, showing an interim peak for April. And the Bradley model, which showed a high turning point this summer and then down into the fall. These models apparently being shattered and set aside as the zigzag rally has continued zigging and zagging upward.

I bet some of you would like to know that, yes Virginia, there is a bullish Elliott Wave pattern that can emerge from a zigzag pattern like this. Zigzags not only form with corrective patterns like the "B" wave we're thinking for this rally, and also not just with triangles which some (like Glenn Neely) are thinking this can turn into. (In which this would apparently be the upward "a" leg, then a zigzag "b" down, "c" up to a lower high, "d" down to a higher low, "e" up to a lower high, and then down to new lows ... or wait, maybe it was already "a" down to March, and now "b" up, then "c" down, etc. in reverse, so that after an "e" wave higher low, equities would bound upward again. Hmmm.) The bullish ending diagonal triangle idea would be that this is the first zigzag movement to form (or be a part of) wave 1 up, then after a pullback in zigzag wave 2 down, there would be a zigzag wave 3 up, all forming a large diagonal triangle that would probably propel the Dow Industrials and Dow Transports to new highs. You know - from a pure pattern perspective, I would not rule it out. And it would even weirdly fit Bob Prechter's early 80's description of a supercycle Wave V in which everyone including the government and society at large were all obsessed with the stock market - I could see that. The fundamental backdrop concerns me, as to whether it can fit with this idea ... will see - the way to rule it out, will be if a drop that re-tests the March lows ends up dropping underneath those March lows.

The other scenario I could see would be a massive "B" wave that would either be already in progress - earlier than anticipated by Tony Caldaro and frankly by myself - ultimately leading (probably after a sizable pullback) to re-test the 2007 highs and conceivably exceed them (yes, some "B" waves can do that) ... this would fit with the Benner-Fibonacci cycle I showed (use the "Cycles (other)" label to see it, that calls for a high point during 2010. Or alternatively, the completion of the Primary A as Tony Caldaro calls it, retesting the March lows, and then start a Primary B wave that accomplishes a re-test of the 2007 highs like that. Sounds like crazy talk by now, doesn't it? the idea of actually re-testing the March lows?!

First things first - we've got to see the water boil to bubbles, or the paint dry or the grass grow long enough to cut. On my charts, you can see price still contending with the Fibonacci levels and now the monthly Bollinger Band midline on the SPX chart. The QQQQ will probably get to $43.30 by the time it's done, although I would think we'll see Tony's wave 4 pullback first before a wave 5 push up to complete that. You can see on the QQQQ weekly chart below, that it has entered into the price zone of prior swing lows that reinforce the Fibonacci level. Normally it should somewhat overshoot the Fibonacci level, so QQQQ at $44 cannot be ruled out before it's done.

The ChartsEdge weekly forecast and the fact that we're facing toward the 26th of the month (this time on a Saturday) both suggest we might expect some weakness from here for the next few days. Perhaps it will be enough to work out Tony Caldaro's wave 4 pullback, before another push up into late September and early October. That will go along with some of Terry Laundry's T Theory ideas too, not to mention the new month-new money. Last time, into the beginning of September, we were talking about the idea that those with retirement accounts might take it off the table, to cash it from the rally. Well that looks premature now, but doing actions like that seem more pressing this time around for the beginning of October. Or would you rather wait and hope for marching to higher levels in 2010? Well - who wants to be blamed in case that really does happen ... but it seems a little more reasonable to think there should be at least a substantial pullback (if not a bearish retest of the March lows) before seeing that. Just my two cents - er, 2% of a dollar which ain't saying too much nowadays!!