Well I am back after a well deserved vacation. What I expected when I returned was a humdrum market. Why? you might ask. Well, it's because typically a rally into July 4th usually fizzles. But this isn't a typical market this year. Seems that everything we have learned about ups and downs and seasonality can be thrown out for 2009. Everything except Elliott Wave, that is.
Chart 1
Take a quick look back to July 14th. At that time the market had pulled back, and the doomsday analysts were talking about another breakdown to test the lows in April. Elliott Wave had actually crossed above a critical buy point. Hence, the EW4 Buy had begun. Dow 9239 was the target price for this Wave 4 to Wave 5 move.
Chart 2
Ten days later, the Dow had rallied the most since Mid March, tacking on 1000 points in just 2 weeks. Dow 9239 is just around the corner. Okay, so for those of you who saw this either in the overall markets or in stocks that had the same pattern, congrats! For those who didn't, let's take a look at what could happen next.
Chart 3
Interestingly, the target high in the daily EW4 buy also corresponds with a weekly resistance point. Does this mean that we really are in a bear market rally? Only time will tell, but I can tell you this: Elliott Wave has been working better than most indicators over the past year. Why trade against something that is doing so well?
See you next week!
Tom Gentile
Chief Strategist
Profit Strategies Group, Inc.
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