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Tuesday, June 16, 2009

(Updated) Elliott Wave Update ~ 16 June

Update 7:30 PM : As I say in my post and as Kenny suggests, this still may be a B wave low in my version of a double zig zag to p2 peak as I have been outlining and suggesting for several weeks.
But the market is going to have to start to recover fairly quickly and cannot absorb too much more price damage I suppose. Last night I said my "uncle" point for this being a B wave low was about the 200DMA. And we are almost there. So tomorrow is the key for that count. A nice bullish recovery will bring this double zig zag to P2 peak potential back to the forefront. My chart I posted tonight is largely what I am "looking ahead" to if this count fails.


There were 5 waves down from 956. I am not sure if this is a 5 wave move or perhaps an unfinished double zigzag such as the one in early May that traced from 930 peak down to 878. If it was a 5 wave move, your looking at a potential retrace to the 928 area.

Whats the overall count? Well there are several variations. I have covered them well enough off and on in the past few weeks. My main theme was a double zigzag to P2 peak. Even though my version of a double zigzag is in jeopardy of going down in flames (I haven't quite crossed it off the list) there is still a valid count for a double zigzag (EWI's count). Basically I show that on my chart tonight. But, I'll hold off on an overall count and rather present something I haven't talked about yet technically.

The last time the 50DMA crossed the 200DMA in a bullish manner was in September of 2006. Almost 3 years. The market will be soon on the verge of doing the same. The harsh bear moves are trying to prevent this from happening but I am not sure that it can be at this stage. A crossover is going to happen one way or another.

Did P2 retrace high enough in both time and price to be considered over? I am not sure of that answer. I was hoping for a few more bullish weeks and a higher price closer to 1000 but the market is in danger of not sustaining the breakout run (unless it reverses real quick!) for the short term.
So stepping back and just looking at the wave structure in a simple way one can see 2 zigzags. I have shown variations of this before. A P2 which cannot retrace in price on one ABC move will trace a second zigzag and if need be, a third zigzag which is whats known as a triple zigzag.


Tying the two themes together of a 50/200 crossover with a second (X) wave allowing a triple zigzag to a proper P2 peak is something I am mulling at this stage.


So you can see a general battleground may be setting up. The market will likely seek support from both the 200 DMA and 50DMA and oscillate about the two for a bit. These oscillations will result in some kind of second Intermediate level (X) wave before finally bottoming somewhere above 875. This (X) wave could take the form of a 5-3-5 zig zag (of which the first 5 wave move down is over or almost over) or something more complex. And then the market will begin its final zigzag to a P2 peak in a triple zigzag move which will eat up more time (which is probably also a bit on the short side for P2 at this moment) and a higher price retrace.


It really comes down to this simple question: How much price damage can P2 absorb before it can be considered unrecoverable? In my estimation, for a triple zigzag pattern to have a chance of playing out, 875 area should hold firm.

P3 may have already begun. I am under no illusion that the market *has* to do anything. But that evaluation can only come when the 50/200DMA crossover battle is resolved and if 875 support breaks. So its way too early to say.

14 comments:

  1. Great job Dan! but now we have a mixed signal...

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  2. dan, i know you and kenny are of the mind that going overly bearish in this scenario is risky. i'm actually of the reverse mind - many were caught off guard with the start of p2 and i'm afraid they could get blindsided by a serious correction here. i have IT indicators with major flags across the board, supply/demand, VIX, breadth, etc. I've also seen the golden cross (50/200) converge many times only to reflect or fakeout. do you have an alt count coming for the downward biased?

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  3. The 200ma was not really a barrier on the way up and the $INDU lost it's 200ma with virtually ease already, so I'm hesitant to consider the 200ma on the SPX to be very relevant.

    The INDU might be a "tell" here.

    We shall see. Thanks for the post.

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  4. Thanks DE. The wait and see mode of the topping process is in play. We know it's either here or coming soon. Tough to call a top (as I learned at 936) with manipulation at hand and earnings on the horizon. I'm thinking we get a pretty quick deeper retrace with one more push up as manipulated earnings get one more quarter of glory before the big fall. Excellent work as always.

    Thanks,

    Shanky

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  5. Hey! I just noticed. You stole my wave count. I'm telling Mom! MOM, Dan stole my wave count!

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  6. LOL Kenny the counts are all free!

    Johnny Blue, yeah my bearish count is count down the market in 5 wave moves!

    Seriously an 875 retrace would not be surprising.

    Actually nothing would be surprising. I am fully ready for P3. The rally has been worthy. I am also ready for one last bit of surprise upside.

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  7. thanks brother, you're still the king regardless of how this plays out. thanks for the updates

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  8. Hi Dan,

    Thanks for your bullish option involving the WXYXZ waves, which I have asked you that option about last week.

    However in order to get other expert's opinion, can you let us know EWI's viewpoint right now. Do they see P2 is over? If not, what are their counts?

    Thanks again and look forward to hearing from you.

    Richard

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  9. No prob Richard I was thinking of your comments this week.

    EWI is leaning toward WXYXZ. They just say a dignificant decline is underway and 875 offers support.

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  10. Hi Dan,

    Thanks so much for your reply. I learned in a hard way that I should not look at only one option but rather I should look at both the bullish and bearish options, and let the market decide which option to take.

    Keep up the good work and all the best.

    Richard

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  11. Neg divergence on the RSI (also now under 50) Neg divergence on the MACD
    Neg divergence on the MACD histogram
    Neg divergence on the CFM
    Neg divergence on the Volume
    Bearish STO cross
    Bearish ADX cross
    Loss of the 20sma
    Loss of the uptrend line from midMarch
    INDU back under the 200sma with ease

    Hard to see how another leg up magically materializes to overcome these, imo.

    We shall see.

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  12. Hi Daneric,

    None of us knows how the future will unfold, but the scenario that makes the most sense to me at present is a pullback to 875, then a P2 peak above 975 (maybe even 1000-1100), and then P3 to retest 667.

    One of the reasons that I don't think that P3 has started is that P2 only spent 10 trading days around the 950 level. That's hardly any distribution time at all. Remember when many of us were comparing this P2 with the one in 1938? That P2 top took many weeks of distribution before the P3 decline began.

    Lastly, this P2 has rallied for about 13 weeks with no significant pullback. Finally, we are getting a correction. But 956 to 912 is only 44 points (or 4.6%) so far, and not very impulsive or high in volume. All of these facts make me doubt P3 has begun. I think it's more likely that we pullback to 875, then finish P2 around 1000 to 1100.

    Just my reasoning to contribute to our discussion.

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  13. This is just one humble opinion. 946 was the top and will be for a while. And I think the last wave up from 666 was a (completed ABC)... That may sound a bit strange, but lets see how things play out.. www.mbewtrader.blogspot.com

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