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Tuesday, May 26, 2009

Elliott Wave Update ~ 26 May


Upside Surprise indeed. How about I slap up a chart, threw up some degree markers and call it an update? hehe.

Rather than post a detailed chart on where they market may or may not go, I'd rather talk about a few details instead. 1) Advance/decline volume was a paltry .26 in the opening moments. Then a hard reversal that broke a ton of short stops and massive short covering. Gap at 900-903 was closed. Market got bogged at 912 resistance or so. The futures were lolly-gagging since Sunday-Tuesday morning and MM's seen a chance to smack it the to the upside. Thus a stampede to higher prices.

The whole pattern since the initial rise to 929 seems to be triangulating in some sort of fashion.
The 60 minute chart shows one potential pattern.
Triangle waves or just X waves in general are unpredictable in the short term to a degree. But stepping back and looking at the big picture, the market is consolidating above breakout resistance and holding key support at 878. The 200DMA drops lower and lower. Stuck between the 2 for now.
I suppose 878 will break lower only when everyone least expects it. Or it won't break at all. I make no assumptions other than the market will do what it will do.


21 comments:

  1. True...but low volume remains a concern.

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  2. how can the 60 min be forming a triangle when wave C is 5 waves down which if its a triangle should be 3?

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  3. Anon, that is the unanswerable question.

    Interesting enough, the e-minis could be said to have traced out an ending diagonal in a C wave position. They made a new low overnight.

    But I agree which is why I have my 30 minute chart showing something different.

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  4. looks like a slam dunk double or triple three with a Y to come (your 30m) based on the 5 wave impulse in the middle. only question is whether we get a zigzag or triangle to end it. new lows or not will tell us. thanks again dan

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  5. This fellow says that the reason for the uptick is unwillingness to execute timely down tick trades:

    http://traderfeed.blogspot.com/2009/05/quick-look-at-strong-buying-pressure.html

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  6. I suspect the breakdown will come when companies begin to warn on Q2. This will happen in the next month. The key to the whole rally is the belief that the second half of the year will have GROWTH. The realization it won't is called P3.

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  7. The markets will break 878, may not break it by more than 5% max, just to bottom out the daily RSI so we can float on air again for the next 2 1/2 months as denial continues and series of more brutal distributions and short squeezes pushes the S&P to 1100. During this time oil will probably hit just shy of 75, gold will hit 1075, the 10 year will hit 3.75, and the USD index will drop to 75, but all is good as we will only be just at the precipice of collapse, meaning rally harder. Unless another big player pulls the plug early this summer, nothing dramatic will impact the markets until later this fall when 10 years treasuries are north of 4%, gold is north of 1100, the USD index is south of 70, and the S&P makes it retreat from 1100 to 400 before bouncing hard on worthless dollars.

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  8. Looks like the market have another backtest to the trendline from 666 today.
    And 910 should be (D), the market will gap lower to (E) tomorrow

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  9. Daneric,

    Can a 5 Wave follow a 5 wave? 925 to 880 was a 5 Wave down and if the S&P 500 rallies up to 915 to 920 you can say that is a 5 Wave move as well.

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  10. TradeKing's current classical TA (non EWT) on SPX:

    In the intermediate term... They're calling this a symmetrical (bearish) triangle pattern with a duration of 47 days after the in-bound down-channel of 175 days. Needs breakdown on volume to confirm.

    Short term, their program has spotted the MACD and MA crossovers, an outside bar, and the recently seen shooting star. These have happened on 5 consecutive days (before today, which isn't charted yet). These are, of course, all bearish short term indicators.

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  11. could the spike down today (the marked (b)) be a failed (c) wave where the (a) was the nice 5 wave impulse down? Is this against the rules?

    Also if this is a triangle then the marked (a) wave off of 879.61 must be 5 waves, right? I cannot imagine being able to find 5 waves on that move.

    thanks for the insight and ideas on these charts.

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  12. and another question...triangles are 3-3-3-3-3 but the EW blue book states that "...most of the subwaves in triangles are zigzags but sometimes one of the subwaves (usually c) is more complex than the others and can take the shape of a regular or expanded flat or multiple zigzag. ..." (p.51). So since we can break down the triangle's A wave into w-x-y (one 5-3-5 zigzag would be pretty much impossible to find, I think we can all agree) and that is not in the C position, then I think we'd be stretching the chances of it being a triangle. And that impulse seems too perfect an impulse. Has anyone ever seen strange triangles with strange C waves or other strange waves not in the C position?

    thanks again.

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  13. Hey Dan - thx for answering the triangle question 2nd comment - I do enjoy your work

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  14. "It's time to go short again"

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  15. If Clevland win tonite, then SPX is going to make new high tomorrow.

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  16. If SPX make new high tomorrow, then Jordan will make another comeback...

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  17. Longs are going to get kill tomorrow... Hahaha

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  18. Dan, according to stockcharts, descending triangles are always bearish. Although they are typically continuation formations, sometimes they mark reversals. What are your thoughts? If this descending triangle was an X wave, that would imply this triangle to be bullish.

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  19. Here is that link to stockcharts: http://stockcharts.com/school/doku.php?id=chart_school:chart_analysis:chart_patterns:descending_triangle_

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  20. Tom, per EW triangles are always continuation patterns. With point E breaking to the downside of the triangle ie. sometimes breaking to support of the triangle resulting in a retracement. The downside is then immediately followed by an impulse wave continuing the direction of the wave before the triangle.

    Triangles are almost always a consolidation pattern before the final impulse or in this case the final wave of an WXY where X is the triangle.

    Hope this helps i am learning myself.

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  21. Don't confuse a descending triangle (which is bearish) with a contracting wedge, also called a symmetrical triangle (which is a continuation pattern).

    The big difference in the two besides the base flatness/inclination is where "A" begins the pattern. On the triangle, A should be at base, whereas, on the wedge it will be at the top trendline.

    That's why if this is a descending triange (as Dan has it drawn on top chart), it'll take longer for it to play out as both "D" and "E" need one more close touch.

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