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Tuesday, May 12, 2009

Elliott Wave Update ~ 12 May



Primary Count: A minute wave [iv] of C up finished tracing its low today at 896.47. The late day move up was the first subwave 1 up of a final move to a new high.

Alternate Count: 930 was the peak of a C wave rally from the mid-800's. Today's low was a wave 1 (or A) down move in a larger retrace pattern to lower SPX levels.

Commentary: The 15 minute chart shows a bounce at the low today of one of the more extreme outer trendlines. Overall the move down ended pretty much where I expected at between 897 and 900. This is the "control" low and the market must maintain above today's low of 896.46 or else a confirmation of a larger bear move down will occur.

The (close) alternate count has a lot going for it as well obviously. The market is impulsing down in 5 wave moves and counts well enough from the 930 peak. But a subwave C of a corrective flat is supposed to be a 5 wave move impulse pattern so the jury is out if this is just the opening gambit of a larger bear move below 896.46. Also a typical retrace to the previous subwave 4's spot occurred in late afternoon and hit just over a 50% retrace spot which is typical of a wave 2 move.

The overall pattern fits better with the primary count of this being a Minute wave [iv] low. However the market will likely reveal its hand shortly. A move under 896.46 confirms a larger bear move down.

The other "tell" is if tomorrow is a big gap up open then it is likely confirming my primary count that the market wants to make one more peak above 930.

Bottom line is this: a clear 5 wave move down occurred from 930 peak. Is it a bear wave down or a subwave C corrective that implies the market is ready to get bullish again and make a run for a new high? My primary count favors one last run for a new high. However a very close second is the larger bear move pattern. The actions overnight and early Wednesday will confirm the true direction.

I ditched half of my 401K longs to protect my profits as there is no guarantee the market is going higher from here.. I am a permabear of course. The fact that I held this long amazes me.

16 comments:

  1. Dan are you short in your regular account? What are your thoughts on the VIX?

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  2. Thanks Dan. I think you are wise to sell some of your 401K longs. This thing will eventually roll over and it looks like the time is soon. I think we gap up in the AM on "better than expected retail sales" and maybe achieve a new high or at least test the 930 high. I grabbed some SPY calls late in the day today and will look to exit tomorrow hopefully for a nice profit.

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  3. Yeah I nibbled FAZ Friday and sold end of day Monday. Too much regular dayjob going on to daytrade much this year so far.

    Trading account is 100% cash at the moment.

    401k is down to 25% long S&P indexed fund. No hedges. I'll reload more longs if the market pulls back nicely and I can identify an (X) wave...

    I have too much important work going on to be distracted by trading at the moment.

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  4. I am long as well into the close. The impulsive nature of the rally today looks like a clear 5 wave pattern to me but I have been known to be wrong.

    Excellent post Daneric, I was blind to yesterday's market action and these 1 minute charts are excellent and very revealing.

    My question is that on your red [2] wave, waves (1) and (4) cross. I'm just curious if this can actually happen on 1 minute charts? What do you make of such a crossing? I always throw away counts with crossings no matter what even if they seem to describe the market action. What do you think?

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  5. Is it possible that wave c is going up in 3 waves and Ist wave is over at 930 and wave 2 of c is coming down as 3-3-5 flat.

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  6. No they shouldn't crossover at all. just ignore the subwaves in blue LOL on that one hehe

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  7. dan, i was in the minor 4 of C camp as well (expecting a harder pullback, see kenny's latest), though i'm looking at the bkx and the compq which having clearly moved on from the rally as well as some very trusty indicators - the zweig thrust and the mcclellan. they're saying we may be done at 930 (i'd call the whole thing an (A) with a (B) to come if so). we shall see shortly though i don't expect us to move up hard any time before 880s to 890s on the spx (channel trend since april). good luck

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  8. Johnny Blue, if 896 breeches, I'd say you may be right and 888 would be a possible bounce target. Then 875. And by then the 200DMA will come down further and a run for it will likely occur and maybe the SPX hits it without making a new high

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  9. given that news coming out for the last two days is bearish and GM could lay an egg anyday, big boys would lean on alternate count and make that happen.
    primary count has just one more day, which is tomorrow AM in my opinion and even that we could get 10 points up. lot will depend on what futures are tomorrow AM. no point for them to go with primary count and the barrage of bad news ruins their strategy.
    with alternate count, they are already in control.
    just two cents. i am biased because i am stuck in a faz.
    linus

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  10. Good analysis Linus. As a permabear myself, the hard takedown is very possible if it going higehr

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  11. I love the big charts on your "Public Chart List" at stockcharts.com !
    Super!

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  12. Dan,

    If we make it below 888, wouldn't that invalidate your primary count since 4 will overlap with 1? Or do you have 1 somehwere else? If we breach 888, we might very well be in P3 or we might need to relabel everything to make it work.

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  13. Dan sorry I had not seen that 1 was labeled as 871.

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  14. I am thinking out loud here... Market likes to keep investors guessing. So, it is a perfect setup for MMs to keep the permabears guessing whether minor 5 is done or not. This will allow MMs to pull it down nice and easy without heavy shorting by the permabears.

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  15. thanks daneric for note above.
    like i said alternative scenario is going to hold. after retail comes GM. if we hit 875 or below, we go down further. bulls are angry they rallied 16 points in the last 1 hour and it was wasted by a bear raid this morning. bears are winning this week.
    back to my note above. cost of trade is high for primary, least resistance is in alternate.
    we could see 875 and depending on GM timing, we could see 850ish, that for sure is 10% retracement from 930.

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  16. htf is kenny? also , shanky is a troll, lol!!!shank, who,s ass you kissin today? lol.

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