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Friday, May 8, 2009

Elliott Wave Update ~ 8 May

Primary Count: SPX is tracing out the last few subwaves up of Minute Wave [v] of C of P2.

We can safely assume where subwaves (i) and (ii) are marked. At the very least there appears more upside to come on Monday in either a subwave (v) to peak or a "third of a third" bullish gap open and skip over resistance and run to the 200DMA .

There are 2 upside scenarios for Monday. 1) The weak scenario in which this last move up is just another ending diagonal and Monday's high manages to at least fill whats left on the January island top gap. The more bullish scenario is a huge gap up in a subwave "third of a third" and the market makes a sprint for the 200DMA in the 950's.

I slightly favor the ending diagonal scenario at the moment and about a 938-943 high because the waves seem to be struggling with big downside dips. It reminds me of the March bottom where the market kept popping up as it was heading down to 666. So in that regard, its interesting.

But it would be strange for the market to come so far and fall short of the 200DMA before a correction. So overall I am agnostic. I'll have more this weekend.

After peaking out on this last move up, I am generally forecasting an overall correction of the entire 2 month rally of at least 40-50 points for starters. That's all I can say at the moment.

Sentiment is awfully bullish. And that may signal a near term top.


  1. You're a legend dan. One of the few to get quite a few calls right during this up wave. great stuff

  2. Thanks again, Dan.

    Clear and concise.

  3. Dan, on your third chart you show pink (iv) overlapping pink (i). Is this possible?

  4. Thanks Dan.

    I think that Monday follows the pattern of the past couple of days with a gap and crap. Except this time I don't think it rallys back.

  5. Dan, does this mean that P3 is about to start ?

  6. Overlap is possible in an ending diagonal

    As far as P3 starting, I am specualting that no it will not. I think social modd is not yet ready for this. P1 took 17 months. For p2 to be over in less than 3 seems out of place.

    A pullback, perhaps 38% or more, yes I can definately see. But new market lows from here?

    It doesn't feel right just yet.

  7. Hi Dan,

    Firstly great charts and analysis. Last night I posted the following scenario that's been playing in my mind on Kenny's blog and he seems to think that it won't play out to next Friday. I see you are talking about Monday possibly being super bullish and we get our top then. I would love to have your thoughts on it meandering next week so that the 200 day MA gets lower and the bear trendline coming into play...

    "Many of us are thinking the S&P will need to hit the 200 day MA before we get our much deserved large pullback so it made me think when it "could" occur and what the level will be at. It currently stands at 956 and falls on average by about 2 points a day. So by next Friday 15th May it should be around 943.85. The 8 week rally of the S&P has still not hit the bear market trendline that is created when you join the 2008 December low and 2009 January low. That trendline looks to be hit by the 200 day MA on that day and it would be so significant if the S&P finally hits that trendline and kills the current rally. And what is special about the 943.85 figure? Well it is the January 2009 high. So it all fits in so perfectly in my mind.

    I have done a chart of what I am talking about:"

  8. Excellent work!

  9. Guys, in an ending diagonal 4-1 overlap is a MUST!

    Love, Kenny

  10. Daneric,

    What no bearish possibility? (LOL) Is there a possibility that bad news over the weekend could make wave 5 truncate, and start a big pullback in pre-market Monday? Maybe we fall to 900 or 850 before we reach 950? Just thinking of other scenarios.

  11. "I am generally forecasting an overall correction of the entire 2 month rally of at least 40-50 points for starters."

    Today topped ~930, yesterday spx was 900.
    Thats hardly a pullback 40-50 points
    after such an 2 month run ?
    What am I missing ?

    Dan what is your target for Primary W2 top ?

  12. Anon, after a Monday/Tuesday top then a possible very bearish pullback of 40-50 points. But this is P2 so i wouldn;t bet the farm on it.

    Its just my general thinking because bullish sentiment is very high according to EWI

  13. Dan, in an ending diagonal, aren't all the waves subdivided into three? In your chart, you have wave (i) subdivided into five waves.

  14. Dan, If C.5 is an impulse, wave iii cannot be the shortest, then pink iii target = 937? and pink v target = 951.

    $NDX found resistance at 50EMA on weekly. $SPX weekly 50EMA is currently at 987.

    Thanks for sharing the analysis.

  15. Ending diagonals - still confused!

    Yesterday there was a possible one where (iii) was the shortest of (i), (iii) and (v) - which I thought was a breach of an EWT rule.

    Today there is another possible one where (i) is clearly labelled i to v (looks a very convincing impulsive at that level too) but I thought (i) of an ending diagonal must have a 3 wave substructure.


  16. Anon, yeah I have to revisit the ending diagonal thing this weekend. I agree that its not a perfect waveform.

  17. I suspect in the coming weeks you will see a heavy move out of the financials and into everything oil and gas. Oil and Gas seems to be setting up for what could be a vicious move up in the coming months.

  18. Actually Dan, I think I do see wave (i) subdivided into three waves if you examine the futures market between end of day Thursday and start of Friday. At around 8:30am on Friday, the futures dipped in a second mini-wave, then turned back up before markets open in a third mini-wave. As for wave (iii), I see a second mini-wave occuring between 1pm and 2pm on Friday so I also see wave (iii) being subdivided into three waves as well.