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Amateur Investors Weekend Market Analysis (11/27/10)

http://www.amateur-investor.net/Weekend_Market_Analysis_Nov_27_10.htm

Overall nothing has changed regarding the overall wave structure from the March 2009 low as it appears the S&P 500 is exhibiting Wave C of a larger "ABC" corrective pattern. Also notice how the S&P 500 recently stalled out near its 61.8% Retrace calculated from the October 2007 high to the March 2009 low for Wave 3 of 5 of C.



Meanwhile for the past 3 weeks the S&P 500 has been in a choppy consolidation pattern which appears to be Wave 4 of 5 of C. So far it looks like Wave 4 of 5 is evolving into some type of "abcde" Triangle pattern as the S&P 500 has been holding support above its 50 Day EMA (green line). If we are seeing a Triangle pattern develop then we are missing "e" to complete the pattern possibly around the 1180 level.



Meanwhile once Wave 4 of 5 ends then the final 5th Wave up would occur to complete the larger "ABC" pattern possibly around 1291. 1291 was calculated by taking the length of Wave 1 which was 118 points and adding that to the potential Wave 4 low of 1173.



Finally keep a close eye on the Banking sector as the Banking Index (BKX) hasn't been confirming the move higher in the S&P 500 since the July low. Keep in mind we saw a similar divergence in 2007 as the BKX began to breakdown (points F to G) while the S&P 500 continued higher (points H to I). Eventually the S&P 500 peaked and caught up with the weakness in the BKX. Furthermore also notice the BKX has been developing a potential Head and Shoulders Top pattern the past several months with the key support area along the Neckline near the 43 level. If the BKX were to break solidly below its Neckline in the coming months that would eventually spell trouble for the broader market.