Market Update - 2/17/2010

Very tight and light trading day today. The markets didn't do much. The SPX hung around 1097-1100 for most of the day. So far, this action is actually very bullish. It seems to be consolodating for a potential move higher.

The extreme bearish count from yesterday gets tossed out now. I will stick with my count I had on the Nasdaq, and call this recent move up a Minute Wave [ii]. Like I said yesterday, the down move seemed to small to be a Minor Wave 1.

Here is the updated count:

Not much has changed, except some degrees of the waves have been changed and/or moved around. But overall, it remains the same, and that is that we may have some sort of potential wave 3 coming down in the days to come. But according to this count, I am expecting a slight new high tomorrow. Perhaps 1104-1105. However, if we break this level and hang above it. We may go a lot higher before we may come down. Breaking back below 1090 will be bearish according to this count.

Also, you can see that the SPX hung around it's 50% retracement level all day.

The Nasdaq has virtually the same count.

If the Nasdaq leads the way up tomorrow, it may reach it's 61.8% retracement at 2239. But I'm afraid if the Nasdaq gets strong enough to reach this level, the SPX may break 1105. So it will be key to watch how the Nasdaq reacts as it approaches this level.

Despite all the bearish wave counts, there is one bullish technical pattern that could be forming. And when I say bullish, I mean extremely bullish.

If this Inverse H&S pattern plays out, it will take us to new highs. The target is somewhere around 1155-1160 on the SPX. It will be very important to watch the SPX as it approaches the level where it could make that potential right shoulder. If we bounce up sharply from there, we may break the neckline and head straight up. Just keep an eye on this pattern for now, as it is still developing.
Again, if this H&S pattern plays out, the over daily SPX count may change to this. With a final target of 1200.

But remember, this is all speculation. How many time have we seen a head and shoulders pattern actually work? I wouldn't worry until we actually form that right shoulder and break that neckline. The past few H&S patterns have all failed to do that.