S&P 500 - Waves - September 6, 2010

It is many weeks since market topped in April and I still cannot firmly decide between a number of wave configurations that I follow.

Here are 3 that I am currently keeping on my desk.

I) Bullish Alternate



Very self evident count. The area below 1040 may not be seen for a very long time. If this is the count, we have a bull on a rampage and those who believe it, better get long and stay long and laugh at doom peddlers and Hindenburg captains all the way to the bank.

II) Up and Down Alternate



It can fold in a staight forward manner, finishing nicely at some widely-watched Fib extension (time and/or price) while setting divergences and telling us all in advance to get out.

It can also become tricky and last for weeks. It can fool bulls into being bulls, and dupe bears into giving up being bears. It can register impressive numbers on a host of breadth and momentum indicators before suddenly petering out.

III) Bearish Alternate



For this one, we should see faltering price and deteriorating breadth very soon.


There can be more, but these three are good enough for me for now. I have no strong preference for either, but if I had to choose, I would say market breadth suggests a higher probability for the first two. If either of the first two comes to pass, August peak will be bettered. If I wanted to speculate for that, I would start thinking about some calls or spreads, October or November, targeting 1130-1140 (or higher depending on my degree of bullishness).