The rally today invalidated the wave count that I have been proposing here. This means the trend remains up, and returns my bias to bullish. 1375 remains a distinct possibility for the future, but it will have to wait for now. Our first task should be to locate the next probable area of significant resistance.
To locate the next level of resistance, we will begin by comparing the length of our current wave to previous waves. It was the length of the wave up from October 2005 to May 2006 that yielded our initial price target of 1522. As the chart above illustrates, that would have given our current wave a length roughly equal to the October 2005 to May 2006 wave. Since this level has been broken, the next probable level will be a length 1.382 times the length of our initial wave. This suggests that our current wave will assume a length of 218.51 points. If we add that amount to the March 2007 low of 1363.98, then we obtain a probable target of 1582.49.
Another way to calculate the next probable level of resistance is to use the initial thrust up in March as the basis of our projections. This initial wave up assumed a length of 74.91 points. Interestingly enough, if the final wave up assumes a length equal to the initial thrust up, then that would put the S&P 500 at 1580.89. This gives us two fundamental methods of calculating probable resistance pointing to roughly the same area.
This suggests that the 1580.89 - 1582.49 level should be our primary target for the current wave higher.
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