Market Update - Pattern Analysis

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This chart contains a few things of interest.  This is the NYSE, though similar comments could apply for other indexes.

The green box is what I would consider an ideal projection for the end of the current wave up if the pattern up since the Oct 2011 low is an ABCDE pattern - a type of contracting triangle, but with a D wave that is larger than B.  This would imply a small upside potential from current levels of about 2%, with the time to complete being mid next week.

Secondarily, the ABC labels and the blue and pink lines project a harmonic pattern up from the June low.  One of the most common patterns is the ABC pattern where the price of C = the price of A.  The blue lines project that pattern which would be at 8060ish which is about 2% higher from here.

Now another common variation of a harmonic ABC pattern is for the "c" portion to be a smaller abc pattern itself.  So there is an abc within an ABC.  That is what the pink lines project.  The smaller abc would complete at 8000 which is about 1.5% above current levels.

So with these different forms of pattern analysis, we can arrive at a fairly tight resistance zone at the NYSE 8060 level.

This is also in conjunction with a technical picture showing daily time frame bearish divergence and weekly stochastics nearly bought.  So I am watching that level as a prime area for a downside reversal.  But a breakout with a large candlestick or gap through that zone would be a likely sign of a continuing uptrend.

Hourly chart indicators are overbought but without solid bearish divergence.  I think we may see some divergence develop before a possible pullback.  I am anticipating a short/inverse trade opportunity within the next week.