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Keene Little : 8/10/2008 10:22:59 PM

Monday's pivot table: Link

It's possible Friday's rally may have ended the corrective bounce off the July 15th low. It's common in an a-b-c bounce to have the c-wave (the leg up from July 28th) form a rising wedge with 5 internal waves and as the SPX 90-min chart shows, it can be considered complete after Friday's rally. It even did a small throw-over above the top of the wedge, a common ending pattern. Link

I added a Fib time ratio tool onto the chart which shows how long the bounce is taking as a ratio of the time it took for the May-July decline(wave (1) down). A 2nd wave correction, as this bounce likely is, typically takes 62% of the time for the 1st wave. That line is on August 15th (opex Friday) and therefore I'm watchful for the possibility that we'll see a continuation of the choppy rise through this coming week. A 50% price retracement is at 1320.60 if the bulls can drive the market higher.

Or as shown in pink we might only get a pullback and then another minor new high to finish off the rising wedge pattern. With the whippy price action it obviously requires great care in your trade entries and stop management. A drop below SPX 1262 would be a sell signal. The daily chart shows the key level is the July 28th low and it should be hit quickly if price breaks down from the rising wedge. Link

The techs are looking stronger but it also shows a 3-wave bounce off the July 15th low. The sideways consolidation before the 2nd leg up from August 4th is a b-wave and that means the bounce off the July 15th low is a correction and not the start of something larger. If we get some more rally this week I see an upside target zone from the 62% price retracement at NDX 1943.33 to the Fib projection at 1958.49 which is where the 2nd leg up would equal 162% of the 1st leg up. But as mentioned at the start of this post, the minimum requirements have been met to consider the bounce complete and therefore stay cautious about the possbility that we'll start the next decline. NDX 120-min chart: Link

OI Technical Staff : 8/10/2008 9:59:59 PM

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