How the DJIA might finally put in the last wave of the 2009 rally tomorrow.

Since this blog has such a strong Elliott wave theme, it only makes sense to go out on a limb and try to predict exactly how tomorrow will play out since I believe there are very high odds (but never certainties!) that the markets could begin to roll over big time.

First off, if the chart is going to finish with The Owl, I would hope to see it top between 16950 and 16960 tomorrow.  That leaves it with a very ugly declining double top that tells you there is nothing left in the tank of the market pumpers.  I'll go with 16950 in the model since it is a nice round number.

The wave leading into blue 1 could be counted 5-3-5 as in a-b-c.  The middle structure there looks like a nice triangular divider between the A and C subwaves of wave 1.  Blue 2 looks like an easy 3 wave count as does blue 3.  Same for the small wave between 3 and 4.  The wave between 4 and 5 got chaotic with wild up and down swings that need one more down stroke to count out an expanding triangle so that is where the first red stroke down came from.  The final stroke up should be 5 small waves and it should finish up before 10am.  This will be easy to set basic trigger points for:

The break out of the top should not go too high.  I've shown a typical throw over but anything over 16960 begins to be suspect very quickly.  If it breaks out, the first confirmation that we are likely seeing a tiny ending diagonal play out will be the break back into the channel.  It would be comforting (given my heavy short holdings and puts right now) to see both the top and bottom rails taken out by a single wave.  The break down of the bottom rail would be a nice second confirmation that the tiny ending diagonal is done.  But the main reversal confirmation will be if we get a lower low than 4 of C shown below.  This is when I think stops begin to get taken out and gaps down begin to show up in the chart.  Once those gaps start showing up it will set off alarms in the momo shorts computers telling them that the herd is changing direction.  They literally have SW that watches for gaps and volume, etc. and generates trading alarms.
 

By writing all of this down I have probably virtually guaranteed that tomorrow will move to a higher high than 3 of C (the trading Gods hate to be thought of as predictable).  But if not tomorrow then likely very soon anyway so why not have a little fun while I'm waiting...