Play by Play Friday 08-26-11

Intraday:

                If my wave counts are right, we topped out on the buffet bounce from Wednesday to complete a wave 5 of sub wave 1 (sw1) on a 15 minute time frame.  Thursday we put in 5 more waves to complete sub wave 2 (sw2) putting us in a position to advance on Friday.  Friday was a little complicated due to GDP numbers which were contrary to market moves and were actually a bad number and came in lower than expected.  We then heard from Ben Bernanke who pretty much reiterated what he said last time.  When in a down trend, if the Bernanke comes out and doesn’t see his shadow, there will be more down trend.  If he does see his shadow markets will turn (QE3).  All of this had no real effect on the market although markets were watching intently to see what he would do.  The market moves on Friday put in 2 waves of a sub wave 3 so far.

Daily:

                On a daily time frame we are still seeing bullish signals on the MACD and the stochastic but the ADX has begun to turn again.  The daily chart below has my preferred wave count.  The black lines are the primary waves, the red lines are the sub waves of primary wave 1, and the green lines are the sub waves of primary wave 2.  This may end up putting us past the 20 day and hitting the 50 day before reversing by the time we finish sub wave 5 of wave 2.  Or we may never completely clear the 20 day and end up forming a wedging pattern that would be the tail end of a bear pennant and catapult us down.  I am really sorry for switching between strategies and patterns but we have to be flexible when markets call for it.

Weekly:

                On the weekly time frame we are beginning to get bullish signals from the ADX and the stochastic but the MACD is still very bearish.  We appear to be setting up a bullish falling wedge but it could continue to fall for some time.  Although we did und up for the week, which I didn’t think was going to happen (refer to last week’s Play by Play), according to the additive property of candlesticks we put in a doji candle.  If you recall from previous posts, doji are candles of indecision.  Although this doji has a bullish connotation, we could continue to fall as all patterns require confirmation. 

For next week I think that we will have to defer to the daily chart and see where our swings take us.  If my counts are correct, we could end up down for the week.  I am sorry that I appear to be overly bearish but I am just pointing out my observations.  Watch the 1210 and the 20 day moving average on the daily chart for a turn up and the 1020/1010 level for a turn down.  Trade carefully and be safe.