Looking for Short-Term Market Direction

October 30th, 2012
in contributors

by All About Trends

Now that we all made it through the “Nightmare On Elm Street”.

Friday we said:

appleSMALLSo on a miss? AAPL heads to the 200 day as well as the NDX.

Be careful here! Careful about jumping to a conclusion that we are never going higher again because here we are tagging the 200 day average and at a support zone in the NDX and AAPL.

As for AAPL tagging the 61.8% fib zone, into a prior congestion zone, the 200 day average? Should we keep going?

We say GOOD! Let’s get it out of the way because maybe that’s what its going to take here to stop going down.”

Follow up:

And sure enough folks off of that tag of the 61.8% Fibonacci zone AAPL put on like 20 points into the close before backing off a bit at the close.

Weekly chart view of Apple

As for the indexes here? Friday we also said:

“So now it’s all about what happens from here in the coming days. Short cover rally? A retest of the highs? Dead Cat bounce? These are the things we’ll have to monitor one step at a time going forward.”

We’re not that concerned here about the markets because we’ve tagged some serious confluence levels here. Not to mention that we have a large cash position, so expect a bounce in here. BUT Ahhh to where? Well that’s the question now isn’t it.

Below is a 60 minute time frequency of the NASDAQ Comp. that might give us a clue, that clue can be found in the Pink line.

Look at the NASDAQ Comp. here. See that pink line? It’s trend channel resistance. It’s all about that Pink line initially.

IF we are done going down for a bit and the bear count is in play as shown above this index and everything that drives it (AAPL) when all said and done would look something like the red ABC with that being a wave 2 upon completion. That means short cover rally.

That Wave 2 would be a 3 waves up affair with the first wave being a bounce up to the pink trend channel resistance line initially then a backing off of it with a surge higher to follow, IF it wants to follow that script that is. Keep in mind the indexes have been selling off for about 6 weeks so IF Leonardo De Pisa and his Fibonacci gang want to keep playing here then we could also see a 50% TIME move for a 3 waves up affair IF the bear count is in play. That’s a three week move here assuming we follow that script when a bounce starts.

But hold on to your hat here we’ve also got an equally valid bull count to contend with as shown in a bigger picture chart below.

The bull count is all about the red numbers off of the July lows.

Some of you advanced chartists may say but how can that be when we’ve had 5 waves down? If all of this is just a wicked wave 4 then it should have been only 3 legs down but we’ve got 5 showing. I get that BUT look at the blue wave 4 from April of this year to June lows. See it? 5 waves down. So yes it can be 5 waves down and still be in a big picture uptrending 5th and final wave higher. Only time will tell. In the meantime, we’ll be prepared to take advantage of the pending bounce.

Note: The following is by All About Trends. Subscribers receive daily commentary and a weekend wrap-up. Experience our accurate market analysis, trading methodology, and stock selection to raise your equity curve for only $20 for the first two months as a way to sample our market analysis.

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