Market Update - 2/10/2010

Another choppy and volatile day today. Big swings in both directions. A sell off in the morning, and a recovery in the afternoon. This type of choppy action points to some sort of corrective wave pattern.

Corrective waves are the hardest to count. The waves on the smaller time frame tend to get choppy, so it distorts a lot of the patterns. But I have a few scenarios that may play out.

This first one suggests that today was the start of wave (iii). The internals didn't support this, but it could still be in play.

If this count is right, tomorrow needs to be down. And we should probably break 1060 and 1055.

This next count, I have it shown on the Dow.

This count suggests that wave (ii) is a complex triple zigzag correction, similar to the pattern we had for Primary Wave 2.

If this plays out, we should have one more leg up tomorrow, which should end wave (ii). Maybe somewhere around 10150 on the Dow.

There is also a potential head and shoulders pattern on the SPX.

The target is around 1040. 1039 is strong support from the highs of August 2009.

The US Dollar was strong in the morning, but it faded as the market tried to rally.

Regardless, the wave pattern is still bullish. If the market sells off big tomorrow, watch for the US Dollar to rise.