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Saturday, February 12, 2011

Weekend Update 2/12/11

ES
Posted these charts on Thursday:

ES Daily


ES hourly

Friday's action brought a classic looking impulse wave up with waves 1 through 4 complete and wave 5 in progress.

ES hourly

ES 5 minute bars

The problem with the implication here (top very close by) is that next week is options expiration week, which has been reliably bullish in recent history. Never easy, is it?

SILVER

SI daily

After putting in a major long term low in October 2008 at 8.40/oz SI has been on a tear, especially in 2010.  It has generated a Major Wave 1 - 2 (blue), Intermediate W 1 - 2 (purple) and Minor W 1 - 2 (red) since that time.  All the 2nd waves have been zig zag formations.  From the Minor W2 low in Feb 2010 to the high of Jan 3, 2011 five waves up can be counted as complete.  If this is correct, Minor W3 is concluded and SI is now tracing out Minor W4.  Since Minor W2 was a simple zig zag then Minor W4 needs to be a flat or triangle or some type of complex corrective formation to satisfy the Elliott rule of alternation.  Which is why the January sell off has only been labeled Wave "a" of Minor W4.  Also, Minor W2 took a little over two months to transpire, so it would be expected that Minor W4 would have similar duration.

SI daily - zoomed in

So far so good, but now it gets tricky.  In the hourly chart below there is one five wave structure visible since the Minute W "a" (green) low of Jan 27.  That impulse has been tentatively labeled Micro Wave "a" with a low of Feb 3 labeled Micro Wave "b".  The pattern since that low looks incomplete, so there is likely more upside left before Micro Wave "c" and thus Minute Wave "b" is done.  The tricky part is the question of what type of correction is being formed - a triangle, a flat or something else?  Since the early Jan high was at 31.275, which is not far away, it seems a flat is the most likely with that Jan high as the target before any real serious selling ensues.  And, of course, there is always the possibility that my longer term analysis and Elliott count is wrong and that the low of Jan 27 marks a low that will hold for quite a while - in other words, correction over and up, up and away.

SI hourly

Went (nervously) short SI late Friday based on a Trend/Osc sell signal, but given the above analysis I am prepared to reverse positions to long with little hesitation.
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