S&P 500 EOD Review 25 Oct 2011

The S&P 500 registered a sell bar in the last session with average volume. I think we can safely label say that the move up since 4 Oct 2011 has ended and the market is going to head lower or at least enter a correction.

S&P 500 Volume

Let’s study the volume characteristic. The first sell bar of every down move on the chart is indicated with a red vertical line. Notice the volume for these bars and compare that with the volume registered in the last session. The volume registed last night is the maximum volume among all of these bars. Based on that, we can deduce that the S&P 500 is headed lower from the current level.

S&P500 Short Term Primary Elliott Wave Chart

S&P 500 Target

The question is how low. Look at the price change after each of those sell bars. The minimum was a drop of 50 points. The maximum drop is 80 points. If we use these numbers, we can come to 1205 (1254 – 50) and 1174 (1254 – 80). I believe that 1205 region is a strong support level and I expect it to hold. So this is a very likely target. If this level breaks, the S&P 500 can be expected to head much lower to 1174 region or even lower than that.

Straits Times Index (STI) EOD Review 25 Oct 2011

The STI has completed an impulsive move up since 5 Oct 2011 with confirmation of volume which I have labelled as Minute [a]. Thereafter, it went into corrective phase. I believe that a flat is developing with the wave a and b done and c going to start. I have labelled this flat as Minuette (a) and Minuette (b).

The Minuette (c) is expected to bring the STI down to 2655 (50% retracement of Minute [a]) or 2633 (61.8% retracement). Thereafter, the STI is expected to head higher to 2900 region to complete the Minute [c].

Short Term Primary Elliott Wave Chart

Hong Kong (Hang Seng Index) EOD Chart Review 25 Oct 2011

The HSI hit 18968 (just a whisker below 19k) and closed at this level. The volume is not confirming the price though and I think the market is going to head lower, gather some strength and try to break the 19k resistance again later on. Below is the chart of the recent move up since 5 Oct 2011. I believe that HSI moved up in an impulsive move (which is confirmed by volume) and then went into corrective mode with lower volume. I’ve labelled the impulsive move up as Minute [a].

There are 2 corrective waves thus far, one down and followed by an up wave. I think that this is Minuette (a) and Minuette (b). Minuetted (c) is expected to play out next and bring the HSI to 17200 region. This would be the 61.8% retracement of Minute [a]. Reasons why I think the market is going to head lower is because the 19k is providing a resistance zone and buyinh volume is not coming in to break this. Minute [a] was also too swift and not sustainable.

This count will result in nice flat for Minute wave [b].

Short Term Elliottt Wave Chart

Let’s not forget the Alternate count. There is a potential that the market will continue to head higher from here if it can break the 19k with some volume. So we need to watch this closely.

The market is very volatile to place any trades with a meaningful risk reward ratio. Need to let the market play out and show us the direction going forward.