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Thursday, May 14, 2009

Elliott Wave Update ~ 14 May

I don't have a primary count at the moment. I felt last night the market would get a nice bounce here and indeed it was an ok bounce today. Additonally, today's squiggles traced a 5 wave move up and then retrace back to wave iv apex which is a bullish corrrection. This suggests that tomorrow will power back over 900 at least briefly.

My dilemna is EWI has a very bearish count and the bottom today was a second wave one down (I have my degree marked different thean they do) in a series of ones and two's. This implies that the retrace up cannot violate 915 SPX to the upside. This also implies that after this retrace is over (likely tomorrow sometime), the market is due for the "heart" of a wave three move lower which should take the market down in a very bearish down day. That would likely be perhaps part of Friday with most of the follow through on Monday and maybe Tuesday.

Today's actions were kind of weak if this is to be a new move back up toward the 920's or even a new peak in some kind of B wave flat as I described last night.

So those are the 2 counts: 1) The more bearish is a retrace up to no more than 914 SPX. Indeed if a zig zag up from today's low is playing out your looking at about 906 tops (c= a = 906). Then a hard turn back down. This bearish count will eventually power through 875 to a lower SPX number in the coming week(s).

2) The less bearish count is a flat is playing out from the 930 peak and the market heads back to the 920's at the very least on a B wave and perhaps a new peak or even the 200 DMA. Depends on what kind of flat evolves. The problem with this scenario is today looked weak and looked like more like a dead cat bounce rather than a true turn back up. But perhaps I need to give the market one more day to prove itself one way or the other.

But...being a permabear, I favor EWI's count at the moment. They are indeed the experts and I myself was only saying a week or so ago this market is heading DOWN.

So bottom line: I'll let the market tell me tomorrow. A weak move to 906 (particularly a gap up)would be a golden entrance to short. Anything over 910 and my bullish flat scenario is in play. Of course a gap down and bloody opening supports the bearish count.


  1. I load up SRS, FAZ, and TZA bet 895-900 SPX today. I actually expect the EWI scenario to play out. The DX Index is about to have a major short squeeze tomorrow. If not tomorrow, it will come Monday. We will see. However, I def have some longs as hedge. If we rip up higher tomorrow, I will be taking profit on those longs and buy more shorts.

  2. Well done Dan, but why the 906 (I'm not EWI man), from my charts i'm looking for bullish sign over 901-902.


  3. if they are expecting a major down. is it spx 840, 820? any idea dan. did ewt give a range.
    Tuesday is quite far.

  4. No Linus they didn;t. But the sheer size of a series of 1's and 2's and considering it would have to be at least a zig zag which is another complete set of 5 wave moves, just a quick wag the structure would be significant and 820 would be a good target for starters I think for the overall correction.

  5. 882 low today. 896 high of "a". that s16 points. 890 low for B.

    890 + 16 = 906 for C.

    a = c at 906 if my count is correct and this is a zig zag up

  6. thanks dan
    walker said 840 to be key. cashin thinks 820.
    great charts.

  7. Great post. My only concern is evryone has loaded up on sds,srs,faz etc. today between 895-898. What will it take us to be scared scenario may play out. Just hold shorts and do not look at the market for few weeks.

  8. dan
    what is the subscription fee for ewi access that you have. what is the name of their service? have you found it useful. is hochberg the main contributor?

  9. I pay $177 per quarter but I get 3 services, including EW theorist which is writtern by Robert Prechter.

    Yeah its worth it. Its worth it for life in general

  10. Love that last sentence! LOL

  11. All indicators are pointing for a correction to 820 at minimum

  12. Daneric:

    How does Prechter's views blend with your assessment?

  13. New EWF Poll! Please Vote! Thanks

    With Elliott Wave ABC correction how frequent is occurance where both Wave A and C are IMPULSIVE 5 waves structures?

  14. Nice chart Dan...
    Do u think today's up move to 898 is Wave (ii) within Wave [iii]?

  15. even though this looks like a nice 5 wave pattedrn, I'm still a nervous long overnight. 898 was about a 50% retracement. I'm looking at the 902-903 area as a bounce tomorrow. That would be about a 61.8% retracement and 78.6% of wave a.

    That 907 area would be about a 78.6% retracement but that's so deep.

    And maybe it's just me but today's bounce seemed to take forever and has a bullish feeling like you said yet we only got 15 points or so out of it. tuesday's bounce was only part of a day. I guess this could be a flat that just has a very wide b wave.

    I agree with the ewi count as well but like I said this looks wide. I'm trying to see how these waves could be part of the (X) we have been talking about and not a flat but with today's overlap around 896 I can't see a zigzag happening.

    kind of sad if the bounce is already over. like you said dan, it is like old times out there, people happy and talking about recovery. the glut I don't miss though.

    Oh and Dan if I connect the year 2007 top and 666 point bottom the lower Fibonacci fan line hits the bounce almost perfectly. looks awesome but the rally still looks short though when you zoom out, not even a 38% retracement. happened fast too.

  16. Dano, I am on the EWI side myself although I sure wish the VIX would give some confirmation we are headed down. Right now I have to trust the VIX is not going down for a reason

  17. In the above chart, if pink (i) started at 914 and ended at 889, and if pink (iii) started at 897 and ended at 882, then size of wave (iii) < size of wave (i). Does this not contradict EW rule that wave 3 is never the shortest?

  18. Crush:
    size of wave (iii) < size of wave (i), BUT size of wave (v) < size of wave (iii) = shortest is (v), don't (iii) = OK.

  19. Dan, can you post an update on the Banking index? Thanks!

  20. that kenny guy is a fckng joke, wtf did he learn how to count ? you two guys went to different schools together, also i dont like his insinuendos towards you, he cant hold a candle to your ass de, fck hm.

  21. so, both bounts point to market move higher; what about if market just drops?

  22. I'm still liking my alternative P1 still alive count. Been keeping on the back burner for a month now.

    Wave 1 - Oct 10, 2007 - 1576 to 1296 - March 14, 2008

    Wave 2 - March 14, 2008 - 1296 to 1430 - May 19, 2008. This is about 50% of the move down from 1.

    Wave 3 - May 19, 2008 - 1430 to 667 - Mar 9, 2009.

    Wave 4 - Mar 9, 2009 - 667 to 950??? - May 12, 2009???

    Wave 5 - May 12, 2009??? - 950??? to 600??? - October of 2009????

  23. I came up with the 950 target using a 38.2% retracement of Wave 3.

    1430 minus 667 = 763.
    38.2% of 763 = 291
    667 + 291 = 958

    From a time perspective Wave 2 was March 14th through May 19th or just over 2 months.

    If this is Wave 4 is should last just around 2 months from March 9th to May 12th.

    Market is pretty close to both targets.


  24. anon
    yes, there are several in that P1 camp. Their rationale is P1 cannot end so abruptly and social mood needs to turn the page.
    I am in P1 camp myself, since I see no change in social mood, just continuation of what has been going on since end of 2008. credit bubble bursting and de-leveraging. with massive failure of financial system, we got the wave 3 of P1. Wave 4 was the pollyana and golilocks much like last springs (so 2 and 4 are pollyana).
    Since 3 and 5 have similar social moods, something big needs to happen starting May or at least in July. I thought it will be the pandemic, or GM. but niether are happening. Not that I wish it to happen.
    Therefore, although I am in P1 camp, unless we see a huge news from now till July (of same magnitude as wave 3 time period), we wont get wave 5 and therefore the P1 contiuation will be invalidated.