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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.


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