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Tuesday, June 9, 2009

Elliott Wave Update ~ 9 June

Quote from EWP, pg 52 on triangles: "Many analysts are fooled into labeling a completed triangle way too early. Triangles take time and go sideways. Subwave C is typically a complex wave, though wave B or D can fulfill that role. Give triangles time to develop".

There is ample evidence that yet another zigzag occurred today (and not the breakout move) in a complex [d] wave. I knew when I saw it tracing it was not the breakout move. I even knew that the minimum requirement was that it would take out yesterday's high, even if only by less than a point. Mission accomplished. It took out yesterday's high and made a new [d] spot.

Now comes the true [e] wave. It can trace all the way down to 926.44 and take 2 days to do it if it so feels like it. A bearish move down will cause shorts to jump on it thinking this is now the trend (down). But alas all true [e] waves will turn hard against those that do not turn with it.

It could also turn early.

You have to read the intraday waves. Look for a 5-3-5 zig zag. The [B] wave is usually in the middle somewhere and if you can spot it, just count off 5 waves from that. Then buy the [e] spot. The worse thing that can happen is you get stopped out. Every other trader will buy the [e] spot except the stubborn bears. They will be part of the rocket fuel that helps propel the breakout move higher.

I suppose one reason triangles have a low failure rate is that the prices are hanging out up here for a reason: consolidation for a move higher. Then when the [e] wave comes, it gets bought. Its almost a self-fulfilling pattern in so many ways.

One last EWP quote about the personality of an e-wave: "E waves in triangles appear to most market observers to be the dramatic kickoff of a new downtrend after a top has been built. They are almost always accompanied by strongly supportive (bad) news."

So if you think the market is finally collapsing, it could just be this [e] wave and when it turns hard north, make sure your on the correct side of things. I feel foolish making predictions and then them not happening. However I believe, for good reason, via the wave structure and price action of recent days, that a breakout move above 950 is coming. But like I said, I respect the power of triangles until they prove otherwise. I respect this one too. The breakout move should be coming soon enough.

I am out of QID flat, I will respect the triangle. I may even buy the [e] if I have a free moment tomorrow at work.


  1. 930 is my target for [e]. very close to yours Great job Dan!

  2. Triangle always takes a long time to develop...
    Tomorrow will be a perfect set up.

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  4. My count is different but the outcome should be the same. I put wave 5 top at 957 which puts 5 equal to my wave 1. For me this is C of a simple zig zag ...

  5. This rally will ends next friday.

  6. Gon, I have a hard time believing that the market traced a 7 day triangle beneath 950 merely to top out at only 957.

    I have it as a B wave in a final zig zag of a double zigzag from 666 which means the upper target can be much higher than 957.

  7. I agree with Dan.

    If A equals C, a 70 handles rally can be expected from 925-30. Once we get over 950, 957 will be easy cake.

  8. Max. pain is needed for Bears, before this rally can end.

    1K may do the trick.

  9. I got a different wave count as well.
    My 5 waves count end at 951. and this triangle pattern will fail and the C will take it out.

  10. Dan a break of 932 should follow to 926? So like Liz a nice target would be 930?

  11. A lot of people have been watching the dollar, oil and gold to get a clue as to the direction of equities. The theme has been reflation. Specifically its the chart of the USD that seems to be clearly at an elliott wave juncture. We COULD be days or a week away from an important turn.

  12. Small move today in McClellan Oscillator says we have big price move tomorrow,futures pointing up.If we stay up into the close we break 950

  13. Shorted at 950. This is not breaking it today.