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Monday, June 1, 2009

P2 Top is Getting Close

Surprising to hear? Well, if this is a true Intermediate wave (X) triangle then it points the way to the last ABC structure to peak. And it probably is almost finished tracing up "A".

But the banking index may be pointing the way. The banking index has excellent long term Elliott Waves. And it is on its own course. It often leads and lags the SPX greatly. So you really cannot correlate the two. And I have shown recently how I mapped it in some kind of Intermediate wave (3) (perhaps its really a Primary).

Regardless, I hypothesized that the banking index had a MAX retrace of 46.52 because this was where I had its wave (1) low marked and EW rules says wave 4 can never retrace into wave 1's price territory. Indeed it has so far obeyed this as the max retrace was 43.8 which is also just a hair above its 38% retrace mark from where I labeled wave (2) peak. This would be normal for a wave (4). So all is good so far.

When the banking index peaked so early in May I figured if the SPX went to 950 or above the banking index would surely violate my 46.52 maximum calculation. Well it hasn't. In fact the banking index may be forming a leading diagonal DOWN.

I put a chart up of the banking index's short term waves and determined that the banking index could plausibly NOT take out its own high even if the SPX went all the way to 988 finishing P2 top. This would keep a potential LEADING DIAGONAL in place. All of this is speculative but highly interesting and it cannot be ignored.

I like 988 as a P2 top. Why? Because everyone has their sights set on 1000. It would be just like the market to rip the rug out about 10-12 points shy of an obvious target.

EWI showed that daily sentiment is back up to a new high of 86% bullish. That is challenging the Oct 2007 top.


  1. i agree we are near p2 except I have wave 3of5 completing around 6-08 than one last leg down for 4of 5 finally 5of5 completes around 1010.
    Thanks for the charts

  2. Sounds like you may have mapped out a plan for the powers that be. They will need to goose the financials at least one more time to keep P3 from happening.
    Announced at the close today, "JPM to raise $5B." I guess this is "good news" for the financials and they will rocket tomorrow. The press release also says JPM will pay back TARP by the end of June.

  3. Yeah they are due to be goosed. They are WAY lagging this last move up

  4. I love your earlier point that $BKX is not tradable. Non-tradable indices are great!

    Can you please post a chart this week?

  5. $BKX was down today. Did I see that right? (XLF with a little black doji too)
    --Mr. Panic of 1907/2009

  6. Although $BKX and XLF were down today, $RIFIN (Russell 1000 Fin. Serv. Index, the underlying index for FAS/FAZ) closed at 651.46, up (+5.12) pts., +0.79%.

    Also, P+F chart at indicates the target price for $RIFIN at $680, and had a "double top breakout" on May 29.

    BTW, great charts and outstanding work!


  7. okay...but a leading is 5-3-5-3-5, not 3-3-3-3-3.

  8. I had a Fib projection upside of 147 on GS and it reacted quite well there today. I would expect that that figure should not be exceeded if another down leg has begun or will begin soon. However, I wouldn't be surprised if the SPX farts around for a while in the range before one more blow over top. Downside should be limited to 860. Then sometime in July should mark the ultimate high as this coincides with a Puetz crash window.

  9. crude oil top is very near. I think its going to top out between $72- $76

  10. Dan asked the question a few weeks ago as to what would cause Primary 3. I think the answer will be a conflict between North and South Korea which is coming sooner than most people expect. Let's hope it's just a limited conflict and doesn't turn into something worse.

  11. The neg div on the MACD histogram Jul-Sep last year on the $BKX was the kiss of death. Looks identical now. Lights out.

  12. Dan this is a very provacative post. The lagging of the financials is definately providing us clues. However both RIFIN and XLF appear to have broken out of symmetrical triangles and are now working on the backtest of these patterns. This suggests at minimum another wave up possibly to new highs. I would love to hear your comments on this. Thanks.


  13. Dan, Friday evening you said,
    "First, let me say that I think the market likely hit either a "D" or "X" wave peak today. In either case, we are looking at a 5-3-5 zig zag down. "
    You missed a big move. Forget EWI, I lost money by reading your site. I play small cap stocks between $3-5 much easier than following your non-sense

  14. Dan...that 2nd chart in this update may be the single most helpful intermediate term graphic you've ever constructed.

    Look for a dinner on the way...

  15. caldero says you can all kiss his cojones, including plilpe,

  16. No shortage of wave counts kids. This one should be respect IMO. However, if we tank late Thursday or Friday I will not be around to play any potential C wave up.