Tuesday, August 31, 2010

Technical Analysis Update

I think most people are following bearish counts at this point which calls for another wave down to 1010. But given the fact that sentiment is too bearish and the market oversold, I think it's a good time to re-evaluate the options in front of us. I will let the charts speak for themselves as opposed to "speaking for the charts". I posted the count I've had since July. Note that there are no Minor wave labels as I trade Minute waves. What I am seeing is the possibility for a big rally tomorrow, where this rally will end is the million dollar question. If the wave tops around 1060's area, then we have a set up for a Head and Shoulders projecting to 1025. However, if it keeps on going then we're probably going to see a real rally. And of course, there is the V wave count that a lot of bears are counting on which would call for the market to drop hard to the 1010 area. Personally, I am long on my FXI hedge taken at 1070 and all cash as I am waiting for a good swing trade set up before committing to overnight positions.

As for the bullish scenario (and at this point what I suspect is likely), I posted earlier today a Triple Bottom Reversal pattern which we might be experiencing. So this Wave IV that a lot of people are trading can be indeed a reversal instead.

And last and not least, be mindful that there is an inverse Head and Shoulders with a target of 1250, which would go with the Bullish Primary 3 count.

With all this said, I remain bearish and will go leveraged short at the right moment. But it's always good to see what are the alternatives and not get too invested in any particular count.

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