Counting Bars

The divergence buy on Spx 60min chart seems to be working. How far will it go is still the major worry for counter-trend traders.

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I don't have a high-confidence wavecount from the last low of 1011. So I counted the bars instead to gauge who had a better chance of winning:

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The "Bear Flag" is still in effect and will remain viable until Spx can break at least above 1055 and preferably break above 1061.33 to improve the chance Spx will be able to form a 1-2-3-4-5 with 1071 target.

For now; it is still testing the confluence of resistances which are the 27.2% fibo retrace and the an uptrendline:

- img38.imagefra.me/img/img38/8/7/7/aarc/f...

For the ES futures: Tick charts (2584 ticks) is a definitive 1-2-3 from the 1013.50 low yesterday with 4th and 5th to follow. 1048 is the upper target range for a complete 1-2-3-4-5 run.

Addendum:

I bought ES and YM yesterday at the lows and sold YM early this morning at the first potential A-B-C run up (9716) where the bears were "supposed" to add more shorts to sustain yesterday's run down.

But YM and ES decided to use the bullish bar count for Spx 60min instead of the potential mini-bear flag pattern that was forming at the 24-hr 15min chart overnight:

- img38.imagefra.me/img/img38/8/7/7/aarc/f...

Will just use trailing stops for the remaining ES trade and see how it works until SnP500 forms something I can understand with clarity.

EOD Wrap UP!

The bulls certainly wrapped the day UP and away with some sort of a "Flash Rally".

Coming off the lower lows, it sure is not enought to pay for the Flash Crash of May 6. But judging from today's close of 1060, 1061.33 minimum run for a iii-rd wave is not too far away. Then we will have 90% probability of making a iv-th and v-th runs. The 4th and 5th are question marks:

- img38.imagefra.me/img/img38/8/7/7/aarc/f...

Assuming that 1011 is the actual bottom and not the higher low; then 1081 is the target and 1101 the extended target range for a complete 1-2-3-4-5 rally based on available wave structure.

Ideally, 1131.22 must be broken in a single straight 1-2-3-4-5 run of a higher degree on the daily chart.

There is also the possibility of double zigzags and triple zigzags up considering that any rally from this stage is expected to be corrective rather than impulsive. Remember, we are supposed to have at least 14 months of corrective A-B-C on the weekly chart to account for the 1-2-3-4-5 rally of March 2009 to April 2010.

Watch out for DAX of Germany for it's next move toward the upper trendline resistance on the weekly chart I posted a few weeks ago as potential turning point for another run down.

DAX weekly chart pattern is so well defined it is a better gauge for what might happen than any other major global index out there. But there is a caviat to expecting an upper trendline touch run for the weekly chart since DAX is basically forming a potential complex flat on the daily:

- img38.imagefra.me/img/img38/8/7/7/aarc/f...

For the US markets; we just have to wait and watch and perhaps try some short-term trading techniques to catch up with the intraday rally. It is not so often we have such a good start for a rally off a significant bottom.