Expecting the Unexpected ~ The Risk Averse Alert

Saturday, July 03, 2010

Expecting the Unexpected

Let's take a closer look at possibility that, on Thursday morning wave (b) of (2) completed, forming a 5-3-5 "zig-zag" down from June 21st's peak. Thus, wave (c) of (2) unfolding in five waves higher, presently is forming...

OEX 5-min

Thursday's and Friday's trading are plotted at 5-minute intervals on the OEX chart above.

Improving relative strength off Thursday morning's bottom could be seen supporting the Elliott wave count isolating waves 1 and 2 (labeled above) of wave (c) of (2) [up].

This possibility is being raised on account of compelling technical reasons mentioned in yesterday's post — daily RSI being in a fairly "oversold" condition, and MACD positively diverging — as well as the fact that, a strong advance — albeit strictly technical in nature: a "play" — is about the last thing anyone expects here.

Further substantiating the possibility wave (c) of (2) is unfolding is the observation made earlier this week indicating that, declining momentum (MACD) might likely soon stabilize along lines similar to late-April. The market's move higher in forming wave (c) of (2) certainly would do the trick on this account.

Once wave (2) completes over days ahead, waves 1 and 2 of big, bad wave (3) lower subsequently would unfold. These two waves could carry us into August, and mark "a volatile period resulting in major indexes invariably grinding lower," as was suggested yesterday ... providing time and place for such price action as typically develops when long-term moving averages (i.e the 200-day) are but beginning to turn over, as is the case right now.

So, is the conclusion to expect the unexpected this holiday-shortened week in summarizing the technical state of things, as observed recently.

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