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Sunday, June 28, 2009

Divergence Between The Indexes

The move down from peak has been uniform between the indexes. All 3 traced out very clear 5-3-5 zigzag patterns and dropped fairly equally. But since that low a few days back, the DOW actually made a new low since. The SPX and NASDAQ did not. Also the 2-3 day rally has diverged as the NASDAQ retraced more than the SPX and the DOW is lagging. You can see all three on the chart.

A fractured market is not healthy market as EWI likes to always point out. So its hard to say what the outcome will be, but its not a bullish configuration. In any regard, the DOW traced a very awesome 3-3-5 textbook expanded flat. It did not make a new high on Friday.

The end of the quarter "window dressing" may have something to do with the wide divergence.

What I am not sure of is my degree markings for the recent 2-3 day rally. Is it a Minor X blue wave back up and we await what form the Y wave will take? Or will the DOW rally while the NASDAQ pulls back and the SPX trades sideways and an X wave peaks for the DOW a day or so from now?

Regardless look for a continued fractured market (or not - in either case its a clue). If the NASDAQ drops 2% and the DOW only 1%, that means something. What just yet I am not sure. Either way the divergence paints a more bearish picture than bullish.

16 comments:

  1. Futures are up this morning
    Should we expect to start with a peak and have a pull back later ? What do you think ?

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  2. Hi Dan,

    I was away this weekend, so let me express a belated CONGRATULATIONS to you for making the Top 25 Elliott Wave sites. It's well-deserved, and I agree that you will steadily rise in the rankings over time.

    I have been amazed and impressed by how quickly and how well you have learned EWT, which is, as we all know, very complicated and difficult to master. If and when you have the time and interest, perhaps you could post a blog that explains how you learned EWT so quickly. It would be an interesting story...and it might help the rest of us learn EWT more quickly if you mention some tips for how you accelerated your learning curve.

    As always, much thanks Dan.

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  3. Now that 922 was taken out, I speculate a sub wave 1 formed at 913, if that is the case we will see 930.

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  4. hi Rick
    so you bullish ? You expect we go to 930 ?

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  5. rick when do we start shorting the market ?

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  6. Actually, I am not bullish or bearish. I just went long last week because I thought we would see 927. I think think is part of that c wave I was talking about before the rally from 896. And what happened on Thurs and Friday was a sideways correction (or fib retracement if you count futures). And as we speak, I think we are in a middle of sub wave 3 that started this morning at 916 ( with sub wave 1 starting at 913 on friday).

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  7. I would wait for 5 waves to complete, what levels is hard to say until the structure is defined. One could try to anticipate A or short it from the B point.

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  8. thks rick.
    What level would you start putting shorts at 927 ?

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  9. You can probably day trade a short at 927 right now but I personally wouldn't. I haven't gotten out of my long positions just yet.

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  10. Rick, Dan

    it seems to me this market has no more fuel to go up. Don't you think we have seen the peak ?

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  11. We don't know that, this might be another sideways correction (it looks to me like it is) before pushing higher. If you are a trader you should have some set rules for buying and selling.

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  12. great chart, Schweizer. Do you think that we see SPX 880 before we see 950?

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  13. Mandy, where do you see 950 in this channel?

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  14. I was referring 950 from Todd Harrison speaking as the most important level of the year and he predicts the animal spirit could boost the market to 950. Dan sees we have a pull back Wednesday and Thursday after another possible up day tomorrow. Although the chart from Schweizer looks like possible 930-935 and max 940. I am trying to figure out when to go short.

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