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Fibonacci Analysis for Trading These Markets
07/26/2010 10:15 am EST
Friday made a new high that ruined a bearish count for some bears. Don't feel too sorry for them, because they can still devise another bear count. This weekend, I wanted to look at the big picture again, and because there is some ambiguity in the weekly chart of ES, I have compared the weekly charts of other indices. It was an informative exercise.
First, we will look at the weekly chart of ES that has been guiding my analysis by providing an overarching view of the market. Back on May 6, when we had the big one-day crash, I presented an overview of the market and said that I thought it was very possible that we were seeing a W4 of the rally from March 6 developing. I gave two W4 targets with the 61.8% retracement of W3 being the most extreme target that had to hold. Well, as you can see on the chart below, ES did get down to the extreme level and reverse. Now it stands as a line in the sand for the bulls. This count on this chart is made by AdvancedGET, but this software is not the Holy grail. It merely gives one way to count this market. Because not all the indicators confirm ES making a new high, I look at the other indices in the charts following. To confirm that this is most likely a W4, ES needs to get above 1029.50 (Wave B of W4).
NEXT: Timely Look at the Dow, More|pagebreak|
Then we look at the mighty Dow. It too supports the development of a successful W5 with a reversal at the most typical W4 target level (50% retracement of W3).
So what about the next trading session? That is really what my analysis is all about. Actually, we are at a somewhat tricky spot. I can make a case for either strength or weakness. Just because I believe we are in a W5, it doesn't mean I think that every day will be up. The chart below explains what I am seeing in the market. Bottom line, the most bullish thing I can see happening is a gap through the 78.6% resistance level I have on the chart and a strong rally. The next most likely scenario is consolidation under the resistance before heading higher. And then there is a bearish scenario where ES corrects back to the former W4 before heading higher. I can't predict which will happen, but I will give updates as ES yields more data.
By the Staff at BostonWealth.netIf you like what you see here, MortiES at BostonWealth.net can be found here.
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