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Tuesday, June 23, 2009

Elliott Wave Update ~ 23 June

Last night I threw some charts up with a bullish count with the thought in mind that P2 was not yet topped and that at some point, the market will have to rebound for the final leg of P2 in a triple zigzag to P2 peak.

However, the waves have yet to cooperate. Every bounce since the 956 high has been of the dead cat variety and today was no exception.

Tonight I take a different slant and show the waves from a permabear perspective (which I am by the way). I show you the wave degree labels that would most likely fit into a P3 scenario. The initial 53 point move down from 956 peak would only be Minute wave [i] of Minor wave 1 of Intermediate wave (1) of Primary wave [3]. The rebound to 927 would be Minute wave [ii]. That would mean the market is in the midst of a Minute wave [iii] lower.

There really would be no other way to interpret the structures if 956 was the true P2 top. You could change the degree labels and bump them up one level, but regardless the market has reached the point where a "point of recognition" is coming at a small-scale level (if this is the true count)....the meat of a wave [iii] move lower. This would of course most likely bust down through 878 support lower.

So what do I think? It doesn't matter what I think. What only matters is what the waves are tracing out so far. And so far the market is impulsing down in very bearish 5 wave moves and correcting in scraggly ABC's. Today was no different.

We will know soon enough and I have to show you both scenarios.

I'll add that yes the 50/200DMA crossed today yet on the hourly chart, the 50/200 crossed today in a bearish manner. I will also say that the market is "oversold" but that doesn't matter much if this is a wave [iii] lower. We seen in P1, how "oversold" gets even more oversold until you lose all your money.

In the long run, P3 will kill a lot of people basing bounces on basic TA but a wave 3 of any size will crush bounce expectations. I must not fall into that trap and must stay in tune with the waves. And so far, they ain't a pretty picture if your a bull.

Its this simple folks: Either P2 topped or it ain't. There ain't no "in between". I'd say within a week or less I'll chart which one it likely is. But for now, the market is teetering on the edge of a break much lower in the meat of a wave [iii] move (or even the meat of a wave C move if you desire).

The bulls still have time to recover, but they better get their act together quickly or risk losing 875 support, a key level, altogether.


  1. Dan, how far you expect wave(ii) to end tomorrow?

  2. THank you for being objective and posting the other side of the coin. Im loaded to the gills short , if its not this time its next time ,,, next time muaaahh

  3. good analysis dan. i agree on the count, though it's currently my alt. i still see us in a 4 (to 900-903 or done) with a 5 to come down to 880 or so. call it all minor A. this would imply a 3-3-5.

    p3 over vs not - keep in mind we can very well do a full 50% retrace of p2 (low 800s) part 1 up and still be very much be in p2. it doesn't have to be so black and white. good stuff

  4. Phil I am thinking at least 38% retrace which is 903. Second target would be 907.

    The bulls need some upside surprise to push through that.

    Of course maybe wave (ii) as I have it labeled on the chart is already topped this afternoon.

  5. Johnny Blue, A double ZZ has occurred as my count. The only way 956 is gonna get topped (in my opinion) is if a rare triple ZZ traces out.

    In my estimation, and from a common sense standpoint, a triple ZZ *should* not start from such a low price point. It doesn't make sense as the ZZ would have to be a monster.

    What you are suggesting is that a triple ZZ would start its last leg from *below* the start point of the second ZZ (around 847 or 835 depending on where you place the orthodox low)

    So I am willing to enteratin a triple ZZ from a start point of, say, 855, anything lower is really pushing the envelope of EW theory.

  6. thanks for the response dan. so you see why i think a 3-3-5 here makes more sense, especially for your ZZ theory. if not, i know you'll hate this and i certainly don't look at waves as close as you (i rely more on indicators and timing), but, you've seen me say it, i would argue that p2 thus far wasn't a double ZZ but a full intermediate A up with 5 waves. yes it takes work to see them; not so much with the techs

  7. DE, could you comment on ung please?

  8. Hi Dan: Here's a slightly different count for the intraday squiggles, basis the September e-mini contract........

  9. JB, yeah I don't like the 5 wave move up scenario.

    If the market traced out a 5 wave move down pattern, any rally would be just a giant wave 2 back up and 956 is safe as a market high.

    So the key is what kind of pattern traces down.

  10. PSAR flipped on Hourly Charts which means short term rally is coming which could end @ 2:15 or by EOD.. We would find out tomorrow

  11. Dan, Thanks for presenting P3 scenarios. But lets consider another possibility.

    What if we just completed wave 4 of P1 at 956 and we are in wave 5 of P1, which will take us below 666. Mass will believe that we are in P3 and will remain bear and P2 would be starting.


  12. Hi Daneric superb work thanks man.
    Spx close below 935 = 895.10(+2.06)
    Between range that I predict to very short term.
    Below 908 I expect [880,893] very short term.
    Below 935 I expect [790,820] medium term.
    Remember two possibles scenarios:
    Dont`t break range [880,893] and we will see pullback again target expect between [935,921].
    Break range [880,893] and we will see soon 850.

    If spx close hourly above 908 I have to reduce some shorts.
    Tomorrow resistance Hourly 908,900. Macd near to invert again but have to confirm with a close above 908.
    Wednesday’s Economic Data
    8:30 a.m. May Durable Goods Orders
    10:00 a.m. May New Home Sales
    2 p.m. FOMC Meeting

    Click to zoom in.

  13. The only clear five wave up pattern in an index from the March lows, that I know of, is the real estate ETF, symbol IYR. It is nearing wave four support, but its not quite there yet. I think you could use that index as some thing of a proxy for the other major indexes.

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  15. Dan, I did a chart on my own (I can't paste it here for some reason) but I see 927 as the peak of an A wave after a 5 wave down from 956. And 888 (or lower) as the end of B wave and now we would propel up for the C wave. The 60 minute TA support a strong bounce as it looks oversold at this point. If I were to take a guess, we would bounce from here on or from the 880 level to over 927.

  16. Something to consider. We are in a Cycle C from 2007 top, a 5 wave move. If P1 was from 1576 to 666, it was 910 points, suggesting that P1 will be greater than P3 unless P3 starts from a much higher price than 956 (or it would end end below 50!). P3 can be shorter than P1 but not the shortest, so P5 will have to be shorter than P1, but P5s are usually 1.6x or 2.6x P1.

    This perhaps suggests another count might fit better. Let's consider that P3 ended at 741 last Novemeber (roughly the $COMP lows), where a sideways corrective wave 4 (P4) began which corrected 31% of wave 3. Since wave 4's generally meander sideways for an extended period, and wave fours typically retrace less than 38.2% of wave 3, it seems to fit, plus it had alternation with wave 2.

    Under this count, a wave 5 (P5) may have just started at the very powerful and respected downtrend channel line that was tested at 950, for the final wash-out capitulation dive well below 666.

    This chart shows this scenario.

    The key in a Wave 5 is to get capitulation selling. It seem more likey that capitualtion selling will occur after a strong and radid drop to a deep level below the November Wave 3 (666) low, than after a P3 from 956 to a new low with a short P4 and short P5 to follow. That short P5 wouldn't seem to have the capitulation power it needed unless P3 was rather short, and the P5 dove even deeper.

    Either way, if we assume we stay in the bear channel, we either are in a P3 now with a short P5 down more later (smaller than P3 or P1), or we are in the P5 now, and it will set the new deep low and then a then a Wave 1 of a larger degree can commence (true economic recovery).

    The chart clearly suggests this all has to happen in a DAMN HURRY unless the down channel is broken along the way, which I don't see happening. It would be out of character.

    Anyway, just another view we all should consider.