Thursday 7/1/10 wrap up

The Elliott count on ES shows us completing Wave 3 (red) of this down move at today's lows.  Under this count, Wave 2 was a flat, so by rule Wave 4 should be either a zig-zag or triangle.  4th waves can be short, sharp counter trend stabs, and a sharp but short lived rally tomorrow morning based on some sort of news could be the C leg of a zig zag and set things up for a 5th wave to new lows for the move.  However, care must be taken not to insert pre-conceived notions.  So it must be pointed out that there is the possibility that we've seen the lows for this sell off.  We're awfully oversold and divergences on standard RSI's and so on are evident, and the sell off could just as easily be labeled an A-B-C at this point.

The 30 minute V Stoch bottomed earlier today and moved up sharply from there to the point of overbought levels and was rolling over into the close.  However, the selling pressure faded as today wore on as evidenced by the Sell line, so a short sale based on the V Stoch should be entered with great caution.  Further, if the above Elliott count is correct, one would expect a little more than a few hours of up prices for the assumed 4th wave to run it's course.

This trendline/oscillator system is still in bear mode, but today's turn up is setting up a test of that position.  Conditions necessary for a flip over to bullish would be a reading above 20 on the oscillator and an hourly close above the down trend line. On the ES that trendline was at 1045.50 at today's close and dropping at the rate of about 10.50 per 24 hours.