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Friday, May 22, 2009

Tracking Sentiment

A huge part of Elliott Waves is tracking sentiment readings. As a member of EWI, they provide good stuff usually in their updates to info that I do not always readily have access to. Regardless I do use Stockcharts.com $BPSPX, or bullish percent indicator as one thing I glance at every day.

One thing I have noticed is that this indicator likes to form these little double peaks. Another thing I noticed is that once it goes above 70RSI and then eventually corrects downward, the RSI keeps heading below 50 at least , as a minimum. You can look for yourself over the past many years. Currently under 50 hasn't happened yet but seems to be heading that way.

So this is one reason why I think this market has further to correct, at least in time, if not in price. This correction does not mean prices will drop substantially, as you saw in April the market moved sideways for three weeks in price yet was considered a running triangle B wave.

But usually I think some kind of price correction is required to keep the bearishness heading down. A dip below 875 might do that. But the market could trade sideways in a complicated double three correction for a bit and this could drop appropriately. Then when the double three is over, BAM, another ABC move up of Intermediate size, probably to 1000 SPX.

Of course this indicator can bounce around the top for a while, however I think its too late for that as the RSI seems to be headed to that 50 and below marker.

7 comments:

  1. Dan have you noticed a possible descending triangle on SPX dailies or a possible symmetrical triangle on XLF dailies? They are giving conflicting signals so something has to give. If we remain range bound for another week these patterns could play out one way or the other.

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  2. dan, if like what you said at the followings about stock prices not necessarily will drop substantially: So this is one reason why I think this market has further to correct, at least in time, if not in price. This correction does not mean prices will drop substantially, as you saw in April the market moved sideways for three weeks in price yet was considered a running triangle B wave.

    Then the point is the bears won't be looking to make a killing when the market corrects. Would you say then it is safer to keep cash strong and meanwhile wait for the right moment to go long full strength and ride good profit all the way to SPX 1000?

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  3. By the way, dan, do you rule out what you said on Thursday at the followings that we might rebound back to 920 to 930?
    I am looking for a correction upward and a bullish one would not surprise me, in fact it would almost be required for this type of corrective pattern. How high can this Minor X wave go up and still be considered an X wave and not some kind of new ABC move higher? Well I would think a return to the 920's or even low 930's is acceptable. There is no hard rule . See Figure 1-45 through 1-48 in Elliott Wave Principle. This was my inspiration.

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  4. So the truth is it can go either way. Either we go to 920-930 first then down or we go further down from here then bam to go to 1000.

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  5. Kass predicts a side way correction between 5% to 8%. I noticed we have done that almost everyday this week.
    http://www.thestreet.com/story/10504082/1/kass-the-sideways-correction.html?puc=_booyah_html_pla5&cm_ven=EMAIL_booyah_html

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  6. Squiggles on Nasdaq, fwiw:

    http://screencast.com/t/BzJrjSqp

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  7. market is going down...

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