Tuesday, May 17, 2011

5/17 3:00

The basic model for I1 is that a trend in the direction of I1 will hold at the DJI 5-minute, 370-unit (critical) M/A.  Within this broad band the market will also hold at SP futures 30-minute M/A. 
I1 has developed a 7-8 day lead which will be eradicated at some point.  If the market holds at DJI critical M/A +170 points then this will confirm that the lead has disappeared and raw I1 will track the market.  Obviously, this is what I hope will happen. 
SP futures just tapped their 30-minute M/A at 1327.50. 
Key for the intermediate-term trend is DJI overlap of the April high, which will eliminate the 5-wave up potential wave count.  Going into this morning I counted this high as 12,421, but the count ending it at 12,383 was equally valid.  DJI held at 12,380 and avoided the overlap.
Thus, the 5 up scenario is still a valid potential.  If I1 still has a 7-8 day lead then this rally will develop into the 5 up and hit new highs.  I do not believe that this is the case, but that the market counts as complete for the bull from March, 2009.   I intend to sell short at DJI critical M/A.
By rallying from here the market will trap chart traders playing the obvious breakdowns from congestion overhead.

3 comments:

  1. Hi Steve,

    The +170 points on the 370 EMA--that's about 1.3 percent. On some other EMA's and SMA's you've used .5 percent. Do you have a standard envelope size in terms of percent for your moving averages, or does each one have its own?

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  2. pima, each M/A has it's own, worked out over the decades.

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