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Stock Market Quarter End Squaring Before the Damn Bursts

Stock-Markets / Stock Markets 2012 Sep 28, 2012 - 05:54 AM GMT

By: Anthony_Cherniawski

Stock-Markets

Best Financial Markets Analysis ArticleI have repositioned the EW structure to simplify it a bit. Today’s rally overlapped wave (1), so yesterday’s decline can only be another wave 1 of a smaller degree. That by no means suggests that the wave itself must be smaller.


If you get into the 10-minute charts, it begins to look more complex, but I don’t think it is necessary. We often find the shape of the waves changing as we go from a 10-minute to hourly to daily or weekly. That’s OK as long as the waves agree in trend, which they do. The best fit for the end of wave (2) is a truncated wave c (5 waves), held down by the Wedge trendline.

The reluctance to go down now, most likely due to end-of-quarter squaring, is more likely to cause a “dam burst” tomorrow or next week. You can see the blue trading bands tighten up, inferring a very large move once the bands are broken.

Citigroup’s Macro Risk Aversion Model just tested historic lows, suggesting that no one is expecting a big decline. SPX has a good likelihood of one more probe to short-term resistance at 1453.26 before reversing hard back down. The Daily Cycle Top is also at 1464.50, which may be an alternate target.

Today’s action has also caused me to change my view on VIX. Overlap of Minor wave 2 with Intermediate Wave (1) has narrowed down the wave possibilities considerably.

Gold has made a reversal pattern that closed at Cycle Top Resistance at 1780.50, but did not challenge its high at 1790.00. SSEC rose inside the Cycle bands to close at Cycle Bottom support at 2015.23.

The Euro has made a 1-2 count at 2 degrees and may be finished with its second retracement. I would prepare for the Euro to start dropping in the overnight session.


Regards,

Tony

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