Keene Little : 11/4/2007 10:07:50 PM
Monday's pivot tables: Link
The DOW and SPX patterns are very similar but I'm going to show two different wave counts on them to show what I'll be watching for on Monday. The SPX 30-min chart shows the bearish wave count that needs another leg down to finish the 5-wave count (dark red): Link
. That would then set up a 1 to 2-day bounce before tipping back over for new lows.
The DOW's 30-min chart shows a 3-wave decline for last week's selloff (A-B-C) that finished the pullback and now we'll head for new highs: Link
. The key level for the bullish count is the low on Nov 1st (DOW 13672, SPX 1519.30) and I noted on the SPX chart that a rally above those levels would negate the bearish wave pattern.
Conversely, if we first get a drop back below Friday afternoon's low that would keep the bearish wave pattern intact. We'll have to let price be the "decider" here before making any longer term guesses as to what's next for the market.
I see some short term things happening in the market that point to the possibility for another rally in the stock market. It takes an early rally on Monday to keep the bullish hopes alive and a rally in yields (selloff in bonds) would help that. But the longer term picture is looking like a good setup for a market decline from here (it at least tells me bulls need to be cautious at the moment).
Last Wednesday night I showed a Fib time and price setup on the SPX weekly chart that pointed to the potential for a stock market decline from here ( Link
). The NDX weekly chart has also set up a potential market high here: Link
The first thing I want to point out is the two equal legs up from October 2002. The first leg up was to the January 2004 high and then the second leg up is from July 2006 to the current high (shown at 2210.99 on the chart). I then used the Fib time projection tool and started at the October 2002 low and attached the 100% point to that January 2004 high.
Notice the projections from there--equal time projections show major turning points and last week was the next major turning point (at the same time it hit the Fib price level at 2211). These Fib time and price correlations can be very strong market reversal setups and that's what I'm watching for at this point.
But as I mentioned above, the short term pattern supports the possibility that we'll see another new high before rolling back over so that's why I'll wait for price to tell me (whichever key level gets broken first on the the DOW and SPX charts).