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Friday, May 15, 2009

The Bullish Count

I got this idea mostly from Kenny. The market sure counts well in the form of zig zags and actually counts better as zig zags (almost) rather than 5 wave impulse structures. I always believe the market likes to fool the E Wavers though and what looks like a zig zag might be a 5 wave structure. They count adequately as both. Maybe thats meant to be - a "hybrid" and even the market is not sure of itself just yet.


This chart shows a triple zig zag from peak. And you are not allowed more than 3 correctives in a row. So that would imply the move to solid support, 878, means the move is over and the market is ready to get bullish, perhaps back toward the 200DMA in a B wave up as part of a flat.


However techincally to do that you must hurdle a lot of broken support, trendlines, channel lines and other such technical hurdles. All that stuff was tested and failed several times. Why all of a sudden would it pass the test now necessarily? If anything the move lower is ready to intensify further still after this rope-a-dope last 2 days.


I don't favor a bullish market as explained in other posts tonight. Too many down moves since 930 and failed backtests have "flipped" the count solidly bearish. However this IS p2 and you must be ready for upside surprise. If everyone is buying at 875, well here we are at 875 pretty much.


Also the weekly candle is decidedly bearish. And on the 30 minute chart there is going to be a bearish 50/200 crossover first thing Monday. That hasn't happened yet on this rally from 666.79. It will come Monday. Monday will be another key day obviously.


I just felt any bulls reading this might want some hope.

9 comments:

  1. The past couple of days it seemed there was no chance of a bullish count from you despite a week ago it was "200 DMA here we come" :)

    As you say the market always like to make a fool out of all of us, so has it done it by making us all bearish now? Certainly, a week ago with the 200 DMA within touching distance, it seemed like a sure thing but come last Monday, it was pretty much downhill all the way, thus making even the most bullish among us bearish hence would it not be right to assume the market has us fooled again and come this Monday we rally back up again?

    2 things make me feel it could well do so. As it hit 930, it partly filled the January high gap but came down and partly filled the 877-879 gap. Can it not now run back up and fill the top gap and test the 200 DMA since most of us believe it will plummet next week?

    Secondly, since the rally in March, the S&P has kept well above the 20DMA and tested it only once after it hit 875 last month but rallied strongly back off it. Yesterday we dipped below it again but closed above it. How significant is the 20DMA? Can it be trusted as a sign that it will bounce back off it to 930+? I'm too inexperience so do not know how important the 20DMA is.

    I'm also no EWT expert which is why I rely so much on you and Kenny's blogs so if these 2 factors support the possibility that we have seen a near term bottom and can now retest the 200DMA can you provide a chart to show what possible scenario can take place? Or does the chart show such a possiblity is so low that it cannot?

    Thank you for providing such a great blog!

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  2. Oh I forgot to add, the manner in which it has fallen over the past few days ie: the rope-a-dope as you call it :) looks to me like it intended to wait for the 20DMA reach the current 880 level before testing it. You know the market likes all these "coincidence" plays.

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  3. Ninja yes I consider it as well. And volume was very light on Friday.

    If volume comes in on Monday, it can turn up. But holidayc oming up and will they indeed "sell in May" and go away?

    If Friday had been a little more constructive for the bulls and not made a new low, then it would look a lot better.

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  4. Blessings from above unto your spirit

    You had charted (projected) not too long ago the end of [P2] in a time frame ending around Jan 2010. As we look back, one could make a case for an Inverse Head and Shoulders is under construction on the S&P. Where the 741 from late 2008 is the Left shoulder, the 666 of March is the Head, the 943 of Jan 2009 and 930 of May defining the Neckline...to complete this (one year long pattern), one could see the S&P move to a range of 770-750 in order to set the Right shoulder and from that point power back up to take out the 200DMA and breakout through the Neckline. Such a move will take the S$P to the 1200 range. This will also take care of any GAPS (your favorite magnets), that were left behind and finish of [P2] setting up the start of [P3].

    What say you O oracle one.

    God Bless you

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  5. Thanks Dan, but surely if they made it look more constructive for the bulls, then that would defeat the object of fooling us. By making the new low ie: part fill the gap, then it even makes the bulls give up and dump. After running up to 930, the rally was looking exhausting, it can only power further up with short covering, and by making even the bulls bearish is a good way to gets more shorters to burn on the next rally up. With so many banks needing to raise capital, it would be stupid for them let it plummet and render their chances of a sucessful and profitable share issue impossible. Look how GS was able to tailor the market to make theirs work. For the other banks to do the same from 930 was tough but after this pullback it would be more feasible. I'm likely to be all wrong but that is how I see it. As you can tell, I'm not using EWT but market psychology. I'm just curious how my scenario will fit your wave count.

    Thanks!

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  6. Furthermore, the above contemplation accomplishes two things:
    First: Fulfill the old adage (sell in May) that seems popular with some retail investors.
    Second: Bust the (V shape recovery) that is shunned (disliked) by many.
    Thus, satisfaction is achieved to please all parties.

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  7. http://tradingtheodds.wordpress.com/

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  8. Dan.....you do great work

    I enjoy your blog and it is 1 of many I frequent

    There is a 50% shot that we see a big move up monday-wednesday

    Its far from for sure but the Bear Trap alarm bells are ringing

    Which would avoid the cross

    As well 20% on this leg down we see a breach of SPX 864 before a sharp hard reversal up

    Cheers

    trading4dough

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  9. yes volume was low Friday. Isn't that particularly peculiar on an ops-ex day? For now I'm treating Fridays action as an anomaly and am remaining neutral. Mon/Tues and the rest of the week should be more revealing.

    I'll stick with IBD in calling it uptrend under pressure, rather than in correction mode just yet.

    ReplyDelete