Market patterns tend to get arbitraged away. The Monday Effect of a bounce on Monday is now widely known, and had occurred in 20 of the past 22 Mondays (and one of them was merely a time shift to Dec 1, which came on Tuesday). Did we pop up last Friday as an arbitrage against the Monday Effect? Or maybe we grant traders with too much prescience - did the shorts panic and cover?
If the pattern has shifted, the fun will happen this Friday, not next Tuesday (next Monday is a holiday). The pattern I suggested last night of a B wave drop at the open and then a rise to 1075-1083 seems on, albeit we only hit 1072 so far. If we drop hard in a minor wave 3 down, we might hit the wave 4 counter-trend around Friday afternoon.
That is definitely what I thought Friday afternoon... nobody wants to be holding shorts Monday morning.
What I am trying to figure out now is how closely DXY and the market are going to correlate going forward.
Posted by: Brian | Monday, February 08, 2010 at 12:14 PM
On the money there Yelnick..Iran will showcase it's 1st nuclear bomb on Thursday, which should mark a market low with a big rally on Friday
Posted by: betterdays | Monday, February 08, 2010 at 12:31 PM
Actually there were multiple technical reasons for the bounce on Friday at that level including a VIX target at 29. Based on today I would expect to see 1012 on the ES soon. From there we should see a sustained rally - or so it looks at this point in time - but a review of my charts tonight should confirm.
Posted by: Anon | Monday, February 08, 2010 at 01:34 PM
I am not married to wave theory but I like 1012 because it represents a 12% drop from 1150. The first leg down in Gold was 12%. The first retrace in gold was 62% so I'll be liking SPX just under 1100 if this plays out. Another thing to keep in mind, the gold "rebound" took twelve trading days to accomplish.
Posted by: robert | Monday, February 08, 2010 at 02:20 PM