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Friday, May 29, 2009

Honing in on a P2 target

First, let me say that I think the market likely hit either a "D" or "X" wave peak today. In either case, we are looking at a 5-3-5 zig zag down. How bearish and big the zig zag only the market can determine.

Lets just say that 880 holds and perhaps we get an E wave early next week and the triangle pattern stays true (good chance it will). What does this triangle Intermediate (X) wave mean?

I quote Elliott Wave Principle pg 51: "A triangle always occurs in a position prior to the final actionary wave in the pattern of one larger degree, i.e., as a..............or the final X in a double or triple zig zag combination."

(As a side note, I recently couldn't find evidence of an X wave triangle in EWP and said so, but I was mistaken obviously if the book says it can be then it can)

So if the Intermediate sized (X) wave triangle is indeed the corrective (X) wave pattern, it means the market will likely see another Intermediate-sized (red) 5-3-5 zig zag UP to 1000 take place (as expected). AND this next ABC zig zag will be the FINAL zig zag up pattern in Primary wave 2. That is per Elliott Wave theory rules on triangles.

So I have developed a chart based on this theme. The upper target is just above the 38% retrace spot. About 1041 SPX. Time? Sometime this summer.

I must say charting this P2 I had assumed it would experience a 38% setback along the way but it has not. There seems to be a "sense of urgency" with P2 as if it knows it only has a small window in time in which to retrace to 1000 and just above before social mood decides its had enough and throws in the towel again.

Afterall, EWI posted a chart recently showing the SP 500 already trading at a trailing four quarter P/E of 60! Now I don't much pay attention to P/E's and don't use them, however as EWI says, any indicator, even if a lagging one, that shows extreme moves, its worth noting.

P1 took about 17 months to complete. If P2 took 4+ months than your looking at a Fibonacci time of about a 25% ratio which would be acceptable.

This Intermediate sized triangle is important. Because if it stays a triangle and a breakout comes, it means the next ABC Minor sized pattern will point the way to the top.


  1. Don't miss out on my Madonna SPX chart on stockstop. Analyze.

  2. X is still a very big range with the churning 836-880, Y may continue the steep angle of attack and achievable before the Fourth of July. The party would be cut short if the dollar breaks 70, but there are lots of short squeezes from 79 to 70. Short of N. Korea launching a live nuke, won't probably happen till late this year at the earliest, everything is in the most intense stages of denial at the moment so the worse the news short getting nuked, the better it is for bank earnings.

  3. usually in[s167974719]&disp=Pbear market spx stays below 20 ma

  4. sorry didn't post..but per murphy usually bear market spx stays below monthly 20 ma,which currently is don't think market will go higher than 1080

  5. Daneric,

    Wave C of triangle has clear 5 legs down. Also DOW triangle wave C (May 22) went below wave A (May 15th) Would you still go with Wave D finishing? Pl. explain if it still can be counted as a triangle.
    Your WAVE X finishing today scenario is the cleanest one with no broken rules for EWP. Please comment! By the way execellent analysis and charts.

  6. Bechtel, I explained the C leg in this chart here:

    This is the e-mini C leg and it qualifies.

    The DOW I do not necessarily track as exactly I do the SPX. I can allow for DOW "squeakers" because its only 30 stocks.

  7. The last time we had a similar spike on Friday was 2/22/08, the Dow shot up 242 pt during last 30min on the news about Ambac bailout. There was also a triangle 3 week long. The following Mon-Tue the triangle broke to the upside, sp barely hit 50MA, then new lows got retested. Let's see if the herd can push to 200MA Mon-Tue. Certainly i would not want to pick up the last 8pt.