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Friday, April 17, 2009

The Hyper-Bullish Wave 3 Scenario

First, let me say I think this chart is crap and I think it ain't going to happen. I went short in my trading account (still long in my crappy 401K) so I must not believe it. However I cannot figure out a decent alternate count other than the market goes up if this is not an ending diagonal.

This would definately be an "upside surprise". One thing this move would do is capture the public's attention which, so far, has likely remain uninterested in this 6-week win streak rally. Afterall, the market was much higher only in January. However 6 straight up weeks may garner some attention this weekend.

But maybe this is a C wave and it doesn't go to 1000...say only to where C = A at 936. Regardless, the upside potential is above 900 if this is the true count or a larger ABC structure. We have come to the point in the structure where there would be a spot where there wouldn't be "overlap" in the waves for a bit like we have been seeing in the past few weeks.

That spot would mark the "point of recognition". You have heard me use that term on the bear side of things when the bulls have that "deer-in-the-headlights" look and realize that all is going to hell and some gap down occurs that gets the ball rolling. Well, this would be the spot to the upside where that occurs. And if you think about it, its right at key 875 resistance, right at the previous Intermediate wave (4) triangle apex and right at key bearish trendlines. For if that breaks, you're looking at a run at least to 900-920 for starters I think.

Monday/Tuesday will be a game-changer either way. Straight up TA favors the shortside. But Primary wave 2 is all about upside surprise. 887 is another deal-breaker for the bears. Just like 804 was.

I don't favor this at all. The short and medium term waves don't seem to support it. The TA doesn't favor it. However remember the path of least resistance is still to the upside. 875 breaks (and holds) and the door is wide open to higher marks. That would be a "point of recognition" spot indeed.

So if 887 breaks to the upside, count on a move 936 which is the lip of the previous island top gap. That would be at least an ABC move from 666 where C = A.


  1. Like I said, there are about 10 million reasons that this is a crap chart. But a move higher is the alternate count so i took liberty with it a bit....

  2. April 17 Elliott Wave Fork Report for Forkoholics
    EllOsc(15,102) finally crossed 0 today. Last time it crossed 0 upwards was around May 1st 2008 and you know what happened 18 days later.

  3. "This would definately be an "upside surprise".

    Not really a surprise.
    It would stick it to the shorts,
    and fuel the upward move by covering shorts.
    Also the longs that are waiting to get in on
    the pullback would freak out and jump in fearing
    they would miss further upside, thus they also contribute to upside movement.

    Probably the plan is a huge fierce breakout,
    that would cause panic by shorts and longs,
    then an immediate reversal.
    Thats what I am planning for.
    I have a small short positin, and will add
    significantly on the false breakout.

  4. Daneric, this is not 'crap', this is your most down-to-earth analysis so far, congratulations! The bullish percentage indexes of oex/spx/nyse are happily moving higher and at the moment there is no sign of any imminent change of trend. Why should the market go lower if the bullish percentage indexes are creeping upwards and have not yet reached their turning points? The market might lose 2 percentage points Monday/Tuesday, but there is no rationale for a sell off. Going long when the market corrects to 860/850 and shorting the market when it is at 920/940 makes sense.

  5. Very nice anaysis Deneric. I think the same.

    SPX - Relax See the big picture

    This week I will begin by leaving some notes on the monthly chart and then move to the shorter time frame.
    This moving average has been a reference in the last 10 years.
    Who do you think we are in bull market, there is one more example that this movement is part of a movement still in bear market.
    It will be much the examples that I will leave that much on this subject has been questioned by most traders.
    815.28 is an important value, make the low closing in 2002. A value to watch for the end of the month. The next move should expect a corrective option 1 or 2.
    Better than the words the graphs speak for themselves.
    Big trades. Leave your comments it is important to this blog.

  6. I don't know, too many things flawed in this extended rally, fundamentally and technically. Would this imply a V shaped recovery? Why, because of an accounting change and a few pumpers here and there? With the massive amount of deleveraging and wealth lost within the past couple of months, I find it hard to believe that this was all just a blip in the American economy. Technically, way too many downside gaps on just about every stock; at least one, most of the time two, on everything, including two on SPX and XLF. Hard to beleive that at least one of these does not fill, which if it does would imply a break of the current wedge, to further imply a correction to sub 800. One thing that is for sure, if we do see further upside, the ensuing correction will be nasty. I might consider getting long here if you put a gun to my head, but even then I would have to think about it. Not joking either.

  7. I made the previous comment above. One other thing, you hear a lot of people talking about further upside being the result of a "panic rally" or massive short covering, since when have these two things resulted in a new bull market?

  8. Anon, I am not saying this is a new bull market. This is a corrective wave that is correcting the entire drop from 1576 to 666.

    Even a 38% correction carries the SPX to 1000+.

  9. Daneric, that's true, but that retrace you suggest would then occur within a matter of two months, while the decline lasted 15. Seems kind of disproportionate.

  10. Also, if that were to play out it would be the quickest, most extended rally in the history of the world, over 52% in two to three months.

  11. Anon, I don't really like this chart for many reasons.

    But about the biggest quickest rally, yeah I think P2 will go down in history.