Short term, we know the market has been overbought for quite sometime. Negative divergences are visible on all time frames on the RSI and MACD. Yet the market continues to fly higher. In terms of Elliott Wave, we are beginning to look like a complete up wave structure.
The EW Principle states that all waves follow an upward or downward channel, wedge, triangle or pennant. Regardless of the degree, whether they are a primary wave or a small minute wave... they will always take form of some type of channel.
This bear market that started back in October of 2007, has been coming down in a downward sloping channel. Primary Wave 1(oct2007-mar2009) came down in a smaller channel of its own, and Primary Wave 2(mar2009-??) is taking a form of a wedge. A bearish rising wedge. These trendline have seemed to work well in the past, especially on the Dow. Let's see if they continue to work... The key line to watch is the lower trendline of the rising wedge. This line has not yet broken on the Dow. If it does, Primary Wave 2 is most likely over, since a corrective wave usually doesn't have a throw over out of it's trendlines.
Aside from Elliott Wave and trendlines, we are some major fibonacci resistance. We have now retraced over 50% in time and price on the Dow. The SPX is yet to reach it's 50% mark, and the Nasdaq has almost made it to it's 61.8% retracement. But looking at the Dow, it is in a zone of very heavy resistance, and it's not going to be easy to break through. If we fail to break through, it may produce another downtrend.
And here is the full updated count for the SPX. The ABC zigzag from the lows looks complete.
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