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Thursday, March 12, 2009

Elliott Wave Update ~ 12 March

Another super bullish day. Advance/decline volume was once again off the wall high. It must be true that people are more afraid of missing a rally than losing money. Wave structure was a tight channel up today and there may be some pushing early tomorrow to a wave 4 (5) peak.
I have no clear direction on how tomorrow will play out, these rallies usually run 3 days then start to go sideways or slightly down.
Here's what I think:
1) I think that wave 4 will hit the 200 MA on the hourly. When is the question as it will drop as time goes on. Why not tomorrow? It might. Or Monday if resistance and profit taking proves to be too much.
2) The upward advance to 750 was expected, maybe not as quick as it did, but such is bear rallies. The 729-734 gap was closed. The 752 gap, still has a micro-sliver left in it, not quite closed. Now it has hit the resistance zones from 750 to 780. This is a much tougher slog. Many people trapped here will be more than happy to get out break even. So not only does the market have too "take" 750, it has to take 757, 765 and 775 and then 780 even before thinking about an assault on 800 again. After a massive rally, its gonna run out of some steam.
3. So any pullbacks may (should) eventually slip under 750. It then has to hold at support layers beneath 750. So goes the next few days, but then again isn't every trading day like this? Its a game of support resistance I think until we get clearer indications of where this market is truly headed. There are some things that bother me about the market, waves and such, but until we see how it handles the tougher resistance zones, there is no need to change my view in that a wave 5 to a new low will indeed occur.
Volume , either up or down is always a key. That tells the story.


  1. Consistently good. I'll put something in the Kitty for you this Friday.

  2. I put some $ in the kitty already.

    Based on your commentary alone my plan for tommorrow is to hold my longs for the next few days as SPX bounces up and down but to sell my longs if SPX 750 gets broken at any point.
    I am somewhat new at this. Can you please define what you mean by SPX support being broken?
    How many points would it have to go below 750 and for how long before support would be defined as broken?

  3. There are zones of support beneath 750 where trading occurred and the market remembers these zones or layers. Lets say 741 is support. If the market retraces and cannot hold 741 and is driven through it on higher volume to the downside, that is bearish at least for that support layer.

    It will then tend to head and seek the next support layer and so on. Volume is a good thing to watch. Higher volume down moves are a sign that a bear wave may be in the works, in this case 5 of (5). Lower volume (as compared to the preceeding up move) tells you it is could be just a normal retrace (profit taking) and that its consolidating for continued moves higher.

    There is no guarantee the 200MA will be hit. It could shoot into the resistance layers at 759, get stopped cold and sell off a bit....

    The 200 MA is just an "expectation" and these have been known to not turn out as planned.

  4. Dan,

    Tough to call here although the 5 Day Average of the Put to Call is now back to its lowest level since the peak in 10/2007. The last time this happened was on 2/9/09. I suppose we could see one more day higher up to the 760-770 range. This looks like a decent setup for a sharp reversal next week going into OPEX. Although I'm not a big believer in Max Pain it's sitting at 76 for the SPY right now.

  5. Changes in M2M, reinstatement of uptick rule, and more precise details of toxic asset removal are all scheduled for early April. These events seem likely to buoy and rally the market.

    Do real world events override EW wave calculations? (Citi's trick seemed to truncate wave 3's final 5.)

    Do you think wave 4 can keep rallying into S&P 800s or 900s, given these major upcoming events?

    Do you think wave 5 to new lows will be delayed to late April or May, and maybe truncated?

    Thanks, Dan. I admire and appreciate your work.

  6. Book'em Dano! As always...great work