Tuesday, October 9, 2012

Charts 10-09: 3 options

It looks like we are in some sort of wave 4, that has now broken out of the old blue channel.  

Let's posit two options for the wave 4:

1. It will count A-B-C, putting in a new low below 1430.  Wave 1 was 55 points, so this could target the 1480-1485 area.  This would complete fairly soon.

2. It will keep heading sideways in a textbook wave 4 triangle, counting A-B-C-D-E.  This could finish soon, or drag out until October FOMC, resulting in a final rally into the election as high as the 1500 area.  So there are two variants of option 2, one that finishes sooner (FOMC) and later (November election).

Since we have lost the dark blue channel, I want to guess^H^H^H^H^Hsuggest that the wave 5 final move up will end with a failure to regain or hold this channel.  That would be a nice way to end it all.

And I guess the 4th option is that we already topped with a failed 5th.  But that's the least-probable scenario, IMO, and not shown on the chart.

At least, with these several scenarios, we have decently clear criteria to eliminate the losers over the next week or so.

Green, Blue, or Pink?  or something else ...


christiangustafson said...

So far, looking at the tape today, unless we break down through 1435 and 1430, I have to favor the pink option I sketched last night.

SPX 1500 right into Election Day, can you imagine that? My hat will be off to the financial elites for pulling this off, really.

McHugh is still talking about his "Jaws of Death" pattern, the giant megaphone running back to 2000, and which he believes can still set new all-time nominal highs on the indexes. His timeline for a top is pretty loose at this point.

The neat thing about Dr. McHugh is that he has that whole arsenal of indicators underlying his system, so if the foundation starts to sag from dry rot, he should see signs of it in advance.

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sooner said...

McHugh has had a pretty bad record the past couple of years hasn't he?

christiangustafson said...

Lately he's been very good, cautious and patient with these bearish retracements. He sees the internals and can tell that no crash is imminent.

Personally, I don't think he gets his final new high, but I will grant that it is possible, sure.