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Wednesday, May 20, 2009


The chart patterns always like to fool us Elliott Wavers as much as possible. Today looked like a surefire ABC zig zag down and that means the market should reverse back up shortly tomorrow. So it might encourage some to buy in A/H's for instance especially when futures hold steady until 8Pm. However I think that zig zag is a false pattern.

I charted the microsquiggles for a bearish count, not a bullish reversal. So by my count, the market is again at the point of a "third of a third" potential big gap down and big down day tomorrow.

The last time I charted this "third of a third" down potential the market was not quite as primed as it is now for a further fall. It was oversold then and had yet to test the 875 support (an expected bounce area) and was showing positive divergence. But now it is technically ready to hit that big gap down as it is not oversold and peaked less than one trading day ago.

So I think the "zig zag" down is a false pattern and is actually just the beginning of a bigger bear wave down. If I am wrong, hey thats just a better short entry!

Overseas markets may very well bleed tonight which should pressure the e-minis futures. Europe had like 5 up days. They are primed for a fall too.


  1. I'm looking forward to the down moves from overseas markets tonite...

  2. WOW ... same here...

    The third of a third will be a nasty one...

  3. I think you should be right this time Dan!

    Since all overseas markets have negative divgence.

  4. dan, your entire squiggle count also works as an abc down, there's no proof against that. furthermore you have a=c if we touch 900 tomorrow morn (where you 1-2 at the end is really a 4). take a look also at the 15/30/60m indicators of the bkx. there is little room for us to hit a 3 of 3. if i'm wrong, kudos to you

  5. JB, I see that and like I said, the zig zag down is the obvious pattern. But the bearish down volume and other TA indicators (big DOW negative RSI divergence) and other things leads me to believe its a red herring for now.

  6. I got almost the same exact “microsquiggle” as you did on SPX!
    My only difference is that my count at the close is just a little earlier in the series (we’ll see tomorrow).
    FWIW – this is my count on NASDAQ, with some interesting differences.

  7. not touching the 200dma within a week = a very suspicious weakness in the bulls direction = a catastrophic move down would lie ahead. ps. shouldnt the shooting star be at the top? there was a similar candle just one day back. well, the market shows us what its gonna be very soon, thats for sure.

  8. I spend the last 30m-60m looking at the action off of the 878 lows and it looks like it is an ABC move, somehow (by the way that triangle looking thing off of 915 looks like a zigzag-X-expanding flat combination down to 907 with a wide X to me).

    Anyways I think the market is shaping bearish but this chart is so highly speculative that I'm dissapointed. Even if the degree is correct, the red [ii] is retracing hardly anything, not even 23%. How about 907 giving 38%? Second waves should retrace something noticable.

  9. the dollar should gain some noticeable strength too when stox are headed south, right? instead, dollar weakened like hell last trading day.

  10. I am looking to add to my short positions if the market opens below 900. By looking at TA and the chart Dan put together, my guess is that we'll see 875 before 925. Volume tells me there aren't enough buyers at this point to get the markets to another top. Ideally I'd love to short in the 935-940 area but I doubt we will see that anytime soon. We should get a nice 50 to 61.2% correction of the rally from 666 before the summer ends.

  11. well i think futures got hit by 200dma, hence the horrible divergence on h4 chart. i hope tha cash index finds its own strength in a couple of hours.