Long Term EW Count:
In my opinion since the advance from the March 2009 is corrective I am considering that price is unfolding the second wave (A) of a Double Zig Zag.
This scenario assumes that once the second wave (A) is set and done a multi month-year pullback wave (B) should at least retrace the 0.382 of the rally off the 2009 lows.
In order to consider viable that the assumed second wave (A) is already in place and a large wave (B) pullback is underway I have suggested to require that the 10 m ma which today stands at 1914 to be breached and become resistance. As of today with 5 trading days left to end the month of October this is not the case.
In the next monthly chart we can see that the pullback from the September 19 high as found a support at the trend line that connects the October 2011 and November 2012 lows in addition the huge bottoming tail of the monthly candlestick is suggesting that odds that price has established another swing low are large.
In the weekly chart we can see the amazing snap back rally, which has been accomplished with a weekly hammer followed by a huge Marubozu, which has reached the 20 w ma.
After such a large rally odds should favour some consolidation maybe forming a small range body.
The next resistance is located at 1985 while the support zone is located in the range 1941 - 1926 (It would be odd that price next week retraces more than the 50 % range of the Marubozu = 1924).
From the daily chart we can emphasize the following:
- Almost in a straight line price has reclaimed the 10 - 200 - 20 and 100 dma and the 0.618 retracement
- Friday's candlestick is not suggesting that this up leg is over yet as long as the low of the day is breached (1946)
- The next resistance is located at the 50 d ma = 1967 then we have the range 1970 - 1978
- If you have not bought at the panic low on October 15, the absence of a pullback probably has not allowed an easy entry point hence the majority is hoping for a pullback in order to buy therefore probably the next pullback could be a shallow one maybe at the 20 dma = 1928. If the 20 dma is breached a retest of the 200 dma = 1909 should offer a buying opportunity
In the 60 min chart we can see that maybe price is forming a wedge, although I would not give much credit to this potential ending pattern ahead of the FOMC meeting next Wednesday (As long as 1946 is not breached).
If the wedge pans out odds would favour a sharp decline towards the second gap support at 1904.
Regarding the issue of if price has resumed the intermediate up trend or this is a countertrend wave wave (B), I am inclined to consider that we have a new swing low. Maybe we have two potential scenarios.
- Flat or Triangle wave (B)
- Ending Diagonal wave (Z)