with Anthony, ZigZag & Platy
Yesterday in my comments i said “Look for a potential low in the 1313-1315 area today before moving up into 31 May – 1 June high“. The S&P500 closed at 13.32 with a low at 1311.
I now think we are ready for the final assault into an important high and the completion of mini wave 5 and minor wave 4, before moving down into minor wave 5 and major wave 4 completion, meaning that we have 1 last set of 5 before this market rolls over hard in a time frame from November 2012 – February 2013. Ofcourse this window of opportunity will become narrower as time progresses.
The attached chart of the S&P500 shows a few things so lets address each one in turn.
The current wave structure is showing that we have only completed 4 major waves in this set and are in the process of completing minor wave 4 before we move down likely into mid June possibly around the FOMC meeting. At this meeting i am expecting QE3 to be announced at which point the market will rally for the next 5-8 months. This will be potentially be a period when commodities begin to accelerate the most as price inflation in fuel, clothing and food begins to take its toll on the unemployed, manufacturing and heavy industries. During this 5-8 months professionals will raise prices in an attempt to lure in retail players by creating demand. Later in the year there will be more news that the recovery is continuing and the Fed have adverted another disaster at which point we will begin our roll over into the deepest part of this recession.
I have drawn the 50% retracement from the May high to May low. Often you will find that important turning points fall just short of important technical areas. The reason for this is because professionals know that retail players have been trained to trade in a particular way and are looking for certain signs. Professionals can use this for their gain. A lemming may be looking for a ledge half way down the cliff face.
Tudela’s Technical Take Out
Measured moves are one of my most favourite techniques for pinpointing precise targets. The distance from minor wave 1-2 has been projected from the minor wave 3 low creating a projection to the upside in the region of 1348-1351, this is also backed up by geometric support/resistance shown by the purple line. It just so happens that it falls nicely below that retail 50%.
I have also utilized a Gann fan from the March top. The principal behind the Gann fan is that 1 unit in price = 1 unit in time. This is represented by a 45deg line. Therefore if you divide this fan in equal measures it is able to forecast price at a particular point in time, at least that is the theory. You can see that one of the Gann fan lines is directly in conjunction with both the measured move line and also the geometrical support resistance line (purple). Great, so what does it mean, well it means that both price and time are proportionally aligned, when this occurs its increases the odds of a change in trend.
A quick look at the volatility bands is indicating that there is indeed more room to the upside, given the target it is safe to say that we will have 2 positive days up into the target zone outlined above.
A quick look at gold, some of you would have read my analysis from earlier this week https://changeintrend.wordpress.com/2012/05/27/special-report-gold/.It looks like today we completed that mini wave 4 down and now looking for that mini wave 5 leg up, into minor wave 4 same wave structure as equities.
Ill be addressing downside targets in equities and gold as the next couple of days unfold, most likely in a report over the weekend. With 2 days of upside in equities expected its likely that we will hit the upside target of 1348-1351 intraday on Friday afternoon, so ill stay awake for this one. Being in Australia i sleep all through the US sessions, lol.