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Wednesday, May 13, 2009

Elliott Wave Update ~ 13 May


Primary Count: A zig zag from 930 SPX is tracing out and either the low has been achieved today or will be early tomorrow. 930 was the near term high for a C wave up.

A zig zag down means a "three". When subwaves are combined together to make bigger waves (thats what EW theory is all about) it can give a clue sometimes as to what may be happening over the longer term.

A 5-3-5 zig zag is considered a 3 wave pattern and its subwave pattern consists of a 5 wave - 3 wave - 5 wave pattern. Since Zig zags are a "3" they often form a typical "A" wave of a larger wave pattern such as a 3-3-5 wave flat or expanded flat. So what am I getting at?

Well the market seems to be settling on support. If this zig zag is an "A" wave of a large flat corrective pattern, then the next moves will get bullish and head back above 900.

A flat can expand beyond the previous peak and still be considered a "corrective" wave. Of course if a B wave peak formed, a nasty C wave following would occur. See my 60 minute chart.

So in this sense the market can still hit that darn 200DMA I have been harping about and still be in corrective mode of an X wave. Again see my 60 minute chart here.

This is all highly speculative but hey, wave interpretation always is somewhat. A "three" down means the corrective is 1) over 2) The first corrective pattern in a larger "double" three 3) the "A" wave of a flat pattern of some kind.

In all three cases above, it all implies the same thing: A bounce back upwards. How far and how high it bounces will determine what comes after that.

The 4th possibility is that I am completely wrong in my counting and the market will remain bearish. Watch down volume and how it handles this key support zones at 865-880.

6 comments:

  1. Thanks Dan....you always have great insight.

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  2. Great work as always by you and Kenny!

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  3. To Dan From Max Cherry,
    We're on the same page with the "A" down, I'm wondering if we'll have a missing fifth wave with the futures selling off overnight then rallying before the open. By the way Elliot Wave International is having a free week for those interested http://www.elliottwave.com/

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  4. dan, this is an ewave 101 point i get jumbled on a lot but thought i'd run it by a pro. i thought an ewave basic is that in the direction of a trend, in this case your current ABC (the trend is down), the waves in the direction of that trend must be impulsive i.e. we need 5 waves down in the A (instead of your abc with c coming to completion). Then in B we would have a sub abc as it's corrective and not in the direction of the trend (down). Let me know if I'm off. Otherwise looks good

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  5. dammit, nevermind. missed the point about it being a flat 3-3-5. my bad :p looks good

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  6. appreciate your work. But I really don't understand how one can trade off this stuff. The waves constantly change length, and are only really known after the fact (like u saying yesterday was probably the end of a 4 before a move up to 930-50, did you go long based on that?). Probably just me, but my .02

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