No Comments Written by Anthony Truong on February 26, 2008 – 7:43 am

I’m growing weary of trying to count this most choppy of market action, but I think I might have a potential count as shown on the attached charts. The last few weeks’ constant up-down movement may have been an extended second wave, which wouldn’t be out of the question prior to a significant fall.

On the daily chart, you can see that prices clung to the first bright green line for the past week, not definitively breaking it. You may remember that I said once this line is broken, it’ll confirm a 3rd of a 3rd of a 3rd … (ad infinitum) … of a 3rd wave had started. I’ll soften that stance and say if the first green line is broken, it’ll add strength to the notion of a 3rd wave, but if the second green line (on the daily) is broken, that will confirm it.

On the 5 min chart, you can see that tonight’s action made a new short term high into a strong area of resistance. The past few highs have struggled with the 1370 area, but we’ve managed to close modestly above that level after striking 1375 intraday. Prices have to hold below 1380-1385 (the 78.6% retracement of the fall from the 4th February and where wave C equals the length of wave A), or else I’m completely wrong (and we wouldn’t want that, now would we?).

Seems we’re set up nicely for a big fall; treasuries had some impulsive action in the last 2 days of last week, setting up for what could be a “flight to quality” rally; the Dow Transports appears to be forming a very large “head and shoulders” pattern, with the right “shoulder” almost ripe for a fall; gold, silver, platinum and crude oil have all hit all time highs (or at least long term highs in the case of silver), but their wave patterns are becoming mature and momentum is waning; EURUSD is approaching a key level where it MUST start to drop or the bearish view on the euro (and bullish on the dollar) is wrong…

We’ll see what the coming week brings.