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Tuesday, July 14, 2009

Elliott Wave Update ~ 14 July








Today played out much as I expected. Some early subminuette (black) wave iv weakness followed by some up to new highs. Then A/H upside squeeze for icing on the cake. Kliguy was right. There are no exit spots for shorts, at least for now heh.

So 869 is looking good for the (X) wave pullback low. And its retracing quite high for the [b] wave portion of a 5-3-5 down. So I *think* this is the beginning stages of the final Minor (blue) ABC rally to P2 peak. Somebody asked in comments what upside targets are. Upside targets to be determined but suffice it to say, high 900's should be obtainable with potential for the 38% mark (1018 I think) or a bit higher. 1044 is my "max" P2 peak spot. So the range for now is 980-1044.


Why do I think this is the start of the final rally? Well the strong upside volume yesterday for one thing. I believe it was a 10-1 up day. But also sentiment charts seem to be at a good support spot. The fact that 900 was regained and the $BPSPX chart is still low leaves a lot of room for a final rally. So for now the puzzle pieces certainly fit together.


The DOW closed above its 200DMA for the first time since its 50/200 DMA "golden cross" 8 trading days ago.


The best way I can describe the price action in traditional T/A terms is that the market is attempting to trace a second right shoulder to match the 2 left shoulders of the big H&S formation. This pattern should keep the bears attention focused and keep everyone off guard for further up moves. The bulls want to push as high above the neckline on this initial green Minute wave [i] up so that any wave [ii] pullback can hold the neckline or even a small break would reverse and squeeze the shorts yet again.

Minute wave [ii] could be a very rapid down move so as to catch every late bull to wave [i] off guard and keep the bears from pouncing. Then the neckline would reverse back up and a power wave [iii] carries the market back to the 940's and above. Anyways that's the general thoughts I have now.

I am again getting ahead of things. For tomorrow a test of 912 at least seems likely. Looking for the top of this initial wave [i] rally.
As a side note, I am taking educated guesses on the degree of wave structure. That may be adjusted up one level depending on how things go.


56 comments:

  1. Good job Dan!
    This wave setup is just perfect for the bull to hit 1014. But the vix will be at 10-15 and broke the long term trend line.

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  2. Thanks Dan. Big difference in this today and what kenny says is time. You appear to be implying that the mkts go direct to p2 peak from here w/o breaking 869, this would put the calendar to peak in the august time period. Seems that kenny thinks the spx drops to 850ish then the push up to the 1077 area in the mid-sept time period.

    do you have a strong opinion either way at this point. thanks again

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  3. As Palmerjoe keeps beating me on the head with.....they aren't pushing this to 1000 without the shorts in the game......so your scenario is just fine .......will they have to bring it back down further to do that .....who knows but if they do then that is what they will do........understand the game ....accept it and your alternate and primary scenarios will make sense.....stick with your original P2 predictions .....remember....

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  4. Mark, yes, I am implying that the next ABC move is underway. And that should, in theory, complete a triple zigzag to P2 peak.

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  5. Thanks Dan. I tend to agree w/ kil (tough to do) as everyone is expecting a pullback prior to jumping in to drive the last leg up. next two weeks should tell. Thanks

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  6. Going by Fib alone and symmetry, P1 was 17 months, 38% of that would be 6.45 months. If we add 6.45 to March 9th we would get end of September/beginning of October(notorious months for financial collapses and crisis). But given the length and strength of P1 it might take 50%, 61% of that time frame so P2 in theory could peak anytime from October to January. And if we take into consideration the Benner cycle (which calls for a 2010 turning point), maybe end of 2009/beginning of 2010 is where the peak is IF we go by Fib relationships. And in order for the market to peak then, we would most likely need a retracement to at least 845.

    We're trading in interesting times.

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  7. Benner Cycle:

    THE 8-9-10 YEAR CYCLE OF DJIA MARKET HIGHS

    Major DJIA High


    DJIA Bear Market
    1902 June 17, 1901*
    7 months early 6/1901 - 11/1903
    + 8 1910 November 19, 1909
    2 months early 11/1909 - 9/1911
    + 9 1919 November 3, 1919* 11/1919 - 8/1921
    + 10 1929 September 3, 1929* 9/1929 - 7/1932
    + 8 1937 March 10, 1937 3/1937 - 3/1938
    + 9 1946 May 29, 1946 5/1946 - 6/1949
    + 10 1956 April 6, 1956* 4/1956 - 10/1957
    + 8 1964 February 9, 1966*
    14 months late 2/1966 - 10/1966
    + 9 1973 January 11, 1973* 1/1973 - 12/1974
    + 10 1983 No High (a) No DJIA Bear Market
    + 8 1991 July 16, 1990*
    6 months early 7/1990 - 10/1990
    + 9 2000 January 14, 2000* 1/2000 - ????
    + 10 2010 High ???? Bear Market ????

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  8. Lets get past the MA20 shall we :)...

    the S&P and DOW are still trading under BOTH MA20 and MA50..until those are broken...there is no "P2 part 2"...

    for those who care to look...this is still behaving like NASDAQ January 31, 2002 and S&P June 16, 2008 (kissing the MA20 from underneath)...

    those project 4 weeks of selling to 770-790 on the S&P and 7200-7400 on the DOW.

    That is what history suggests, before any major bounce...but this time...things may be different...

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  9. Dan I have a little different count than you have, I think the Monday low was the end of the correction. All the European markets made new lows Monday and i think, the S&P futures. I'm counting tues. action as a "1" and ABC for a "2" and "3" of "3" coming up. What is your opinion?
    also check out the Dax today looks like a 3 up starting and well as Ftse
    http://stockcharts.com/h-sc/ui?s=$SPX&p=1&yr=0&mn=0&dy=3&id=p30413412687&a=172536490&listNum=12

    http://www.quote.com/global/stocks/chart.action?s=%24DAX-XET&chartUi.period=V&chartUi.bardensity=LOW&chartUi.bartype=CANDLE&chartUi.size=620x300&chartUi.minutes=30

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  10. Several weeks ago you made a call concerning the bank index and you were spot on. You determined that the June rally would not surpass May's. Do you have any new thoughts on this subject. Also, this is my first comment and I think a kudos is in order for the work you do on this blog. Thank you!

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  11. Dan, I've followed both you and Kenny for awhile now and have enjoyed both but his short fuse and attitude are too much. Right or wrong, you're my primary man going forward. Keep up the great work!

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  12. Not yet. The trend has stopped going up at this point (922), so is looking good so far. If the trend breaks then Im out.

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  13. This thing wants to make it to 930. I am shorting again around there.

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  14. Hi EWT,

    Why do you think S&P will fall at 930? Thanks.

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  15. do u think the mkt is trying to build that 2nd rt shoulder? a/d is near 9:1. another one of those days.

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  16. I think if the right shoulder goes much above the left shoulder, the H&S idea is dead. We could see 935-945 over the next five trading days, due to bank and tech earnings, China GDP optimism, A/D rally momentum, etc. I haven't given up on another big pullback, but until next week, I think we go up.

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  17. I suppose that a non-Elliotist would consider that a double top. Of what relevance is a second shoulder? A move above the prior 928ish high would invalidate a number of wave counts, that's for sure.

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  18. Plenty of room on the daily's to continue up although overextended on the shorter term time frames.

    IMO a classic short squeeze on good earnings. Too many people are too bearish right now expecting the big pullback and we all know what happens when there are too many people on one side of the trade.

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  19. What about 1 large flat to complete the double ZZ?

    http://waveprinciple.blogspot.com/2009/07/one-large-flat.html

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  20. I said 930 because of the bullishness in the charts/short squeeze/trend change. Bulls will try hard to break the 931 high.

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  21. I tend to agree with EWT but one should also save a little in the kitty for a move up to 940 where I see substantial resistance.

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  22. EW, where will you be looking at to cover your short of 928?

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  23. Right now at 930.. this wave has legs.

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  24. The great P2 will take most everyone's money, both bulls and bears. Bulls not getting out soon enough and Bears getting in too early.

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  25. This market is squeezing out all the remaining shorts. Just crazy how just last week people were all trying to sell. People are crazy.

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  26. My 3rd attempt today at 933 and hopefully last.

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  27. Any wave support that says they push this thing hard into the close?

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  28. EWT,

    We hit resistance at 934 and pulled back just 4 points. Can you tell us your current wave count and how low you think the down wave will go?

    I wouldn't be surprised to see some pullback tomorrow, after the big gains of the past three days, but I still think we'll go up by EOD Thursday and Friday due to China's GDP number, and earnings from JPM, IBM, GOOG, BAC, C, etc.

    After the banks' and techs' 2Q ERs are over, however, I think the markets will be vulnerable for a significant pullback. But maybe from the 945-950 level.

    This will be an exciting and challenging tug-of-war between bulls and bears, especially over these next 2-3 weeks. GL2all.

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  30. As of this minute I see 934 as the peak of wave 5. Then A 929.50, B 933.50, so C= 926-27??. If 934 gets taken out then the count changes.

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  31. Btw, I favor an A wave pullback to 893. The Fib 38% pullback is 909 but again, because of the length and strength of the run from 876 to 934, I would favor a 62% retracement. The fact remain that key support levels were broken last week, for that to be taken out of the picture, the market would have to break 956.

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  32. EWT,

    Thanks for the additional information and clarification.

    The tug-of-war I mentioned in the market is also happening in my own mind. I see good reasons for both a rally and a pullback. If we rise above 934, I'll continue to ride the uptrend. If we start falling, I'll stop out, and go short for the downtrend.

    EWT, your info helps me clarify and balance these competing perspectives. Thanks!

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  33. What happens to the potential for P3 the higher P2 goes? Does a higher P2 mean a higher or lower P3?

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  34. This comment has been removed by the author.

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  35. I see a 50-61.8% pullback as a Wave [ii] in next 2 days

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  36. Liz,

    You may turn out to be right in your prediction.

    But if CIT gets bailed out tomorrow, we may see a "relief rally" (especially in small caps -- think TNA) in addition to the possible rally catalysts I listed above.

    GL2U.

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  37. i don't think it rally stalls until it hits the 956 area the advancing issues are similar to march and i think the count short term is finishing a V of III of 1 from the low (I see as July 13)
    this is a chart of the daily with advancing issues did a good job forecasting the rally.
    http://stockcharts.com/h-sc/ui?s=$SPX&p=D&yr=0&mn=6&dy=0&id=p94292422085&a=160462960&listNum=12

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  38. So according to MAXCHEERY, the V of III of 1 is done. And the IV of 1 should come tomorrow morning and V of 1 come end of tomorrow or Friday.

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  39. thats cherry with two r's, yes i think a iv sometime thurs and finish with a v friday the week after op/ex is usually a down or flat week. i posted early this AM why i think today was a III of 1

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  40. here is a 30 min chart of the Ftse (london) the count is very clear even the wave III gap
    you might have troulbe with pasting just try it a couple of times it should go
    http://www.quote.com/global/stocks/chart.action?s=%24UKX-FTSE&chartUi.period=V&chartUi.bardensity=LOW&chartUi.bartype=CANDLE&chartUi.size=620x300&chartUi.minutes=30

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  41. Liz and MAXCHERRY,

    That's what I'm expecting too: a smallish pullback sometime Thursday, a good-sized rally late Thursday into most of Friday, a decline EOD Friday, and a flat-to-down market next week.

    GL.

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  42. This moves looks very similar to the moves btw. May 4 to 10. And the market is a bit overbought now, I won't be surprise to see a pullback at least 38.2% to form the IV.

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  43. The market is the most overbought since 2007(more overbought than the Mar low)

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  44. Thanks Dave.

    You're right, there are good reasons to expect a bigger pullback for wave IV. But as I've listed above, there are also good reasons to expect this week's surprising strength to continue Thursday and Friday. The tug-of-war is in the market and in our minds. We'll see if up or down forces prevail.

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  45. Dave, I respectfully disagree, I posted this the other day, weekly chart showing a possible H&S bottom. point is STK on the bottom show it's mildly oversold


    http://stockcharts.com/h-sc/ui?s=$SPX&p=W&yr=1&mn=0&dy=0&id=p35838895211&a=172729518&listNum=12

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  46. Breaking News:

    CIT says it will receive NO government aid in the near future, and that talks have ended in failure.

    Emini futures have just dropped 3 or 4 points to about 924 at present.

    The "relief rally" I was expecting now turns into a "disappointment decline" influence (and a fear of a CIT bankruptcy ripple-effect).

    We'll see how much the market is affected tomorrow.

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  47. Hum... now i suspect that the bigger H&S bottom may fail as well since the pattern is too obvious(just like the small H&S we just experience). As most people position themselves long, eventually Bears will make a surprise move to the downside to test 666 (P3).

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  48. dave,
    most folks talk about hitting that number or lower in october. do you see it sooner?

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  49. Dave I agree the H&S bottom will also fail but like the small one it too will break the neckline. A true head and shoulders pattern is 5 down 3 up for the shoulder 5 down (a three ) breaking the neckline 4 comes up the test but not break it and 5 pulls away i dont think either of these is that.

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