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Wednesday, July 22, 2009

Elliott Wave Update ~ 22 July


Probably an ending diagonal in play for Minute [v] that either topped out at 959 or will tomorrow in the 960's. Either way, the waves are choppy zigzags and have lost their pure impulsive look.

I'll be looking for a minor blue B wave retrace soon. To what level we can look at Fib markers and the 38% spot is a good guess that lies in the mid-920 range. 927-934 is a strong support range and thats the general area I am looking at first for a B wave price retrace. Once the waves keep playing out, we'll know more of course.

The last time I was in this positon with the market topping out in the 950's in June, I was looking also for a B wave retrace and a C wave rally toward the high 900's. It didn't pan out. So I won't presume that I must absolutely be correct this time either.

However there is no doubt that this rally leg is so much stronger than the "C" wave rally leg that topped at 956 in June. So I am not looking for a collapse from here as some are. In June I should have been looking at technicals to see an (X) wave pullback coming. I was looking at sentiment. However this time, I think sentiment is the correct primary focus and wave structure. That and good 'ol support and resistance lines.

We'll see! Summer marches on.

147 comments:

  1. That's exactly what i'm expecting. Great job Dan!

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  2. Dan - As you have so accurately observed, the sentiment is nowhere near as bullish as many tend to believe. I agree with you that monitoring these stats ( going forward ) will be especially important.

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  3. Good analysis! 15-min stochastics indicate (especially on DJ) that we could have a short-term rally tomorrow. I hope so! We shall see.

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  4. Dan,
    Is EWI still calling for low 800's prior to the next (final) run up?
    Thanks

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  5. No Mark...they think this is an A wave that is on its last legs.

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  6. There is an alternate count that indicates this is the end of a Z move on a P4 wave. So IF that count plays out, we will see 666 broken. I'll post a chart to show you what that looks like.

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  7. Thanks Michael. What is their prediction on the proceeding B wave, how low?

    EWT, your post is what Kenny is calling for. Either was we should be in for a near term drop of some sorts.

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  8. Anyone heard of the Lucas Dual Trilogy of Time Pressure . . . 11,18,29, and 29, 47, 76?

    I am told that TOMORROW will mark such a confluence from the low of early May.

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  9. Mark, I didn't know that. Same count at the one below?

    http://elliotwavetrader1.blogspot.com/

    or

    http://4.bp.blogspot.com/_2IV2qZlbgks/SmevCyd_PmI/AAAAAAAAAHA/Wunl1czAu2A/s1600-h/chart.jpg

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  10. Wags, your way of thinking seems worse than those anyone.

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  11. stop that nonsense Wags94596 !

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  12. yes , but dan looks like that 1st and 5th wave are quite contracted relative to the giant 3rd wave. aberated or not we r due for a pullback.

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  13. Mark, I've only been following this blog for a few weeks but it is better than EWI. I have a feeling that Dan is destined to become an analyst or hedge fund manager so I won't be canceling my subscription to STU but...

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  14. Put that $BSPSX (bullish % spy) indicator back up dano....gotta see where its at. Great plan/idea, in regards to watching the sentiment (euphoria index here)....that + the vix low too *whatever that is*

    http://masteroptions.com/

    You are on his blogroll too dano....
    Very good options blog, even tho its only a few posts young so far.

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  15. Thanks DE - I'll begin scaling into shorts in the am.

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  16. Dan i see another count thats possible the final "c" might come down a little but if right the next move is up

    http://stockcharts.com/h-sc/ui?s=$SPX&p=15&yr=0&mn=0&dy=12&id=p99273139099&a=173615374&listNum=12

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  17. Looks like we will see 960. I got stopped out at 956 this morning but buying back eveything in the 960 plus if we get there.

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  18. EWT, what did you short at? wasn't it at 956?

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  19. this wave wont die! not yet at least

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  20. I shorted at 955 but covered. I am just looking to re-position.

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  21. that diagonal must still be in play. is this the wave v overthrow?

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  22. Now is time for real predictions.. 969 is 1.618 of last intermediate wave, which has been my target all along. Let's see where this things falls.

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  23. this is one impulsive looking wave, with iii extending.

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  24. I see a resistance at 964-965 so maybe it will top there.

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  25. I'm not sure now, this thing can extend and extend

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  26. this is too easy for the Bull

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  27. I will be shorting at 969 with a 1-2 point stop.

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  28. 9000 dji - done, come on 2000 ixic and 1000 spx.

    get it over with already

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  29. MAX is right its W3 of 5 of ....

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  30. I think it topped so I am shorting at 967.5 with another tight stop.

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  31. have we seen the top or is this just iv of this hopefully final v?

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  32. If A = C, I see the rally end around 1160

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  33. if 970 breaks, we'll see 1000 in 2 days

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  34. I got stopped out again at 970. This thing just won't stop.

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  35. The coming B wave is going to be nasty

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  36. hey Dan. Love your work. Very on point. Quick question; back in 2003 we saw a very strong rally much like we are now that didnt pullback untill 2004. Cant we be in the same type of set up here?

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  37. It's a safe bet now to short at least for the retracement of the most recent wave if not for the B wave. We are beyond overbought at this point.

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  38. This comment has been removed by the author.

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  39. next line of resistance on the weekly chart is 1007
    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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  40. Any idea when that retracement is going to start?

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  41. When we see headline talking about Dow 10000 then pullback start

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  42. Staying with the trend and scalping the dips from the LONG side certainly has been profitable!

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  43. I meant 976, but it appears that may not hold

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  44. just me thinking out loud but i think 1000 is going to be like a light house in the fog

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  45. This comment has been removed by the author.

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  46. Wags, if you are actually buying anything long at these ridiculously overbought levels, you got balls, I'll give you that much!

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  47. Looks like some sideways action that's about to pop to a peak (980?)

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  48. I'm not doing anything other than SCALPING here. I'm biased to the LONG side because that continues to be the trend of the market that I see confirmed by several indicators that I follow. In fact, when crude turned around earlier this morning and went positive it was a HUGE signal to me that the Bulls were about to reassert themselves in earnest. The OIH has been a leader for me.

    Again, for me PRICE is key and I'm not going to play the short side until I see a confirmation of the market breaking down below key short-term support levels.

    As I posted yesterday, the Bull/Bear sentiment via Investor's Intelligence was UNCHANGED from last week, which tells me that people continue to view this market rally in disbelief. I've also noticed a higher degree of "conspiracy" theory posts on various blogs that I find quite telling . . . Far too many people trying to play "pick the top".

    I've been trading for over 28 years.
    That's a mistake that I stopped making a long, long, time ago.

    Good Luck to All.

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  49. I was riding my bike and reading comic books 28 years ago.

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  50. Okay I'll bite, just what are you classifying as scalping, and what is it you have been scalping?

    While I'll agree the short term trend has so far remained intact, it is more than just a little long in the tooth and another lesson that you would/should? have learned would be not to buy into the top.

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  51. Running triangle for subwave 4 of subminuette 3 of minuette 5?

    What are your counts so far wavetrader and EWT?

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  52. Dave, forgive me if I am misunderstanding your posts but you continue to talk about a TOP and/or buying into a TOP. Yet, the price action has not confirmed anything close to a TOP.

    As I recall, yesterday there was another poster who claimed that this market rally would be coming to a "screeching halt shortly". Yet, looking at my indicators I could not for the life of me see what there was to even begin to confirm such a claim. I am not predisposed to a "bias" as some here have clearly shown. I simply trade PRICE and assume that the trend will continue. That keeps me away from creating a "bias" that then gets me into trouble.

    On another note, while people tend to dismiss this week's earnings announcements as BS due to cost-cutting moves and not enough sales and revenues, what they forget is that these companies are getting extremely lean and will see tremendous margin expansion once the economy picks back up again and revenues increase. The market is looking FORWARD and any money manager that isn't in tune with this is dramatically underperforming this quarter.

    For what it's worth, I trade mostly cyclical names. Energy, Coal, Steel, Drillers, etc.
    And some defense contractors.

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  53. You guys are quite amusing...criticizing Wags and constantly stopping out trying to call the top. A lot of the deleted posts on here are your bad trades.

    I've been long 10 ES contracts since the open--that's over $7k in unrealized gains. Why would I exit until it stops going up? That's what volatility/SAR stops are for...to indicate a, wait for it, "trend change". :P

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  54. So scalping is really buying then, or?

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  55. I have not stopped out on anything, Im not long or short, yet

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  56. "Scalping" for me is a TRADE that has a duration from anywhere from 5 seconds to 20 minutes. It can be quite profitable when you are locked into the overal TREND of the market.

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  57. Yet another ABCDE triangle and another thrust to new highs in the SPY.
    :)

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  58. Wags, I see it also, looks like we about done with the minutette 3 of minute 5.

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  59. Right, just daytrading then at this level like a lot of us.

    btw - how come I dont see this traingle?

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  60. Onechi, can only watch this from my Iphone today. Can get a good ct from my charting software

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  61. Dave, what kind of trading/charting platform are you using?

    By the way, the triangle started at 11:30am EST and terminated around 12:40pm EST.

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  62. I got stop @ 961, i went long @ 962 and sold @ 977, Now I'm waiting on the side line to see if we can slice through 980. It's a good so far, My SQNM and ARNA doing good as well.

    TD

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  63. Just traded another new high at 979 SPX a few minutes a go. Do you have any targets up here at this level Dan?

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  64. Thats weird, its clear as day now, don't know why I never saw it earlier. Thanks for that.

    Couple different platforms, both live though.

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  65. What platforms are you using, if I may ask?

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  66. Stockcharts and My brokers live charting, which I dont remember the name of the program they use, not the greatest at any rate

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  67. is there any chance that 979 was the peak or not?

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  68. By looking at candlesticks it seems like the top was at 979. And if that is the top then 975=A and currently we're on B at 977.

    Today was complete mania. I even saw one headline saying DOW 15.000 soon. As if we were in the middle of big economic expansion. Last time I saw something similar was in 2000 when NASDAQ went from 4000 to 5000 in one month and people were still buying (myself included).

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  69. Yep Bank of Canada thinks the Recession is all over with...

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  70. I remember back in 2000 some guy was calling for DOW 35,000 by 2010. People get into this manic/panic attacks and the market reflects it well.

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  71. Even the biggest baddest BEAR on the economy out there (Nouriel Roubini) said that we are in the 19th month out of 24 months. Five more to go . . .

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  72. I don't know how many of you were around trading back in 1982, but this most recent move off the 869 low "feels" a lot like that bull move.

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  73. VIX is higher on the day. It's like the put sellers STILL don't buy this rally. I wanna see those put sellers jump back in with both hands before I'll believe it's a top.

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  74. I would argue the move from NASDAQ 4000 to 5000 felt like a bull move. 10 years later we're excited to be at half of.

    I happen to own my own business and I do thousands of transactions a month. My sales started to deteriorate back in late 2007 when Benanke was telling everyone there was no recession at all. Now, I am at 55% of what my sales were back then and yes the drops have stabilized but I don't see anywhere near the activity I had just a year ago. The fact remains that we are in a nasty recession. One can get high on green shoots but that doesn't make numbers any better.

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  75. "By looking at candlesticks it seems like the top was at 979. And if that is the top then 975=A and currently we're on B at 977. "

    If 979.20 gets taken out then it could be an expanded Z or more upside coming.

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  76. I've been listening to Art Cashin for years and 95% of the time he has been right on the money, but in the last week and a half, I noticed that he wasn't on his game and kept talking about how this rally was ONLY short-covering. Seems to be off his game right now.

    Interesting.

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  77. Current count:

    http://elliotwavetrader1.blogspot.com/

    Expanded Z or??

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  78. we hit 979.43 just a couple minutes ago.

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  79. And the channel just broke (the one on my chart)

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  80. thx ewt. thats what i thought i was seeing on this little chart of mine

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  81. EWT,

    I think we just finished subminutte 3 of 5, and we are now consolidating subminuette 4 of 5 to finally finish Minor A.

    Do you see this?

    If I am right, then 1000 or close to 1000 is in the cards.

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  82. Asset Allocation continues as managers sell Treasuries and buy Equities. This has been going on for a couple weeks now.

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  83. this reminds be of 29' all over again, I suggest you all look at Dan's " the 1930 rally " click on the 1929 chart and look at the dec. 09 area. that is were i believe we are on a weekly basis on the Dow. then look at this


    http://stockcharts.com/h-sc/ui?s=$INDU&p=W&yr=2&mn=3&dy=0&id=p98317755632&listNum=24&a=173496056

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  84. Well, the channel I drew broke decisively so unless a new channel gets formed I see it as an expanded Z and we would be on a C wave on the minuette.

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  85. EWT, just curious but if you think this rally will extend to 1000 would you not be long?

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  86. that's not good b/c every time you go short we go higher ;)

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  87. Very true!! but I don't think anyone saw this up day today. I mean, it was 25 points on a very overbought condition. But that's why we have stops for.

    Gerard, no I would not be long until the wave corrects itself.

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  88. Now I can confirm it's an expanded Z on the minuette.

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  89. wave c truly in affect. the big question now was that truly the end of minute v?

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  90. if yesterday's low was the end of min iv and all of today was minute v (high at 978.90), that makes v just shy of 1.618x'a'.

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  91. Logically speaking (but we all know how logical the market it) it doesn't make any sense anymore to keep on going up on non-news. Just remember couple of weeks ago people were all panicking when we saw 875, the same people who were panicking are probably the ones buying right now and the ones that bought then selling.

    I think it's about time for the B wave to bring some sense into this market.

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  92. ...which makes me wonder because i believe when a wave 3 extends, 1 and 5 are usually equal. so the question becomes, does 5 extend as well or is 5 not in yet???

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  93. if this was indeed the top EWT you mention the 666 number above. Do you think that is the target here? this wasn't the top for the year or do you think the equity divergence from the dollar has caused this to be THE top. Fed has to sell alot of treasuries next week $285 billion! they will be buying back 75% of them with the market this high.

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  94. Yes so now we should be on the X wave. I don't really know what to expect in the longer term. I see Dan's count, Kenny's count. Both calling for different things. However, I am inclining to think this is an expanding triangle and if that is the case, the next target should be 800-810 before going to another peak this year. That's just one possibility I see on the charts. It makes sense seasonally speaking too.

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  95. thing is when longs start to take profit this thing should crater fast. will 927-934 hold?

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  96. never mind. EWT just answered it. Thanks
    I like that target!
    again on the longs taking profit we should reach 875 much faster than we got up here.

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  97. Morgan stanley suggest sell into the strength

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  98. i think i can say v is in now. i'm seeing an ending diagonal from 1115am to the 979.29 peak today just before we say the expand flat play out at the close. if this was not minute v, then it would be minute iii ending but i think that is less probable.

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  99. msft, disappoints!selling off AH. net income down. revenue down

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  100. Wavetrader,
    EWT seems to think we will head towards 800-810. we moved up here from 875 in 9 days. we should get to 875 in about half the time b/c longs heading for the door taking profits will be falling over themselves to get out.

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  101. aaron, i wouldn't be surprised to see that happen, esp with msft's disappointment. we will see tomorrow!

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  102. i guess will also have to see how msft guides.

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  103. axp may have disappointed as well

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  104. MSFT disappoints which is shocking. AMZN meets or beats slightly. futures are tanking. the top is in so the topic of discussion is how far down.

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  105. AMZN down 10 in AH. wow! I thought they beat.

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  106. yes indeed. I think 927-934 won't hold with the awful earnings that MSFT gave along with awful guidance. AMZN tanking this hard and AXP. I think we goto 875 for sure. EWT thinks this was the turn for 800-810. seems kind of low to me but who knows.

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  107. Aaron, AMZN has had a huge run this year (+80%). They beat the EPS estimates by one penny, but they missed on operating margins at only 3.4%

    That's well below the 5% that was seen by AMZN in Q-1.

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  108. $ rallied strong. oil coming down now too. should be a great day for shorts tomorrow.
    not sure what everyone shorts here but I am long in FAZ in the options. got in pretty close to the low at 972. hard to time the options if you want to buy on the bid.

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  109. Why talk sentiment? Prechter and McHugh bears believe this rally into mid fall and SPX 1100 or more. Bulls, they've declared the recession over and are talking great new bull market. Tons of analysts on CNBC calling this a new bull market. The markets are almost 40% off their lows and they're now declaring a bull? Might that be capitualted bears?

    No, don't worry about sentiment. This appears to be consensus. Might that be unsettling to a contrarian skeptic?

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  110. kenny is still calling for one more wave up.

    I say can't fundamentals trump technicals? MSFT and AMZN are fairly huge bellwhethers. not to mention the fed is auctioning 268 billion in treasuries next week. they need this market to hurry up and tank. It needs to start by tomorrow to be near 909(the gap) or lower 875 by the time auctions start tuesday. the fed can pull the plug on liquidity as it looks like they already started today as the dollar rallied hard. The fed will get what they want. They need the market to tank and they did it in June for the last big auction. they need it to crap big this time as this is by far the largest auction. they need a lot of money ready to buy those otherwise they end up buying back a ton like they have in the past. if the market is up here you can bet they have to buy back 75% of them themselves!

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  111. wags, AMZN will open below today's close tomorrow. That seems to bold well for shorts there. It should continue down after that. read my message above about treasuries next week above. The $ rallied hard today. Don't you think the fed started that? they need this market to tank for those auctions.

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  112. Aaron, Again I am not really into all of these "conspiracy" theories that tend to litter so many of these trading blogs... People keep talking about how this upcoming Treasury auction is gonna be trouble, but lets' face it... $120 Billion of the $235B that is being auctioned are T-Bills, which is really no big deal. So is the $42B of 2-year notes.

    Moreover, yields on the 10-year have already been backing up in anticipation of this supply ( not too mention the asset-allocation that has been going on out of T-Bonds and into Equities ). In fact, the yield on the 10-year has surged from a low of nearly 3.42 on Tuesday up to today's 3.71% That's a HUGE move in a very short amount of time... Once again, the markets are discounting mechanisms and already anticipating FUTURE events.

    I wouldn't be surprised to see a pullback from today's highs. But given the power of this move, I certainly would emphasize being "nimble" on any trades that I put on, be they long or short. I need to see more price action in order to get a better handle on whether or not we could see a sizeable pullback from here.

    P.S. Looks like that Lucas Dual Trilogy of Time Pressure that I mentioned yesterday ( and people laughed at ) may have "worked" today. (11,18,29),& (29,47,76).

    :)

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  113. yields have been shooting through the roof.

    am I missing something?

    don't they want these yields to come down and prices to go up for next week?

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  114. One more comment about these Treasury Auctions that people are talking about...

    If you look at the auction of last month, the Treasury received $29 Billion in bids for the $11 billion of 30-year notes that were sold. That's a very high bid-to-cover ratio of 2.68, and the highest since May of 2008 and well above the average of 2.39 in the previous three 30-year auctions.

    I've been around long enough to know that you cannot bet the "ranch" on looking for a bad auction. If it goes well, you can be that there will be a big sigh of relief ( and a rally ) in stocks. And as I have already mentioned in my previous post, yields are already "discounting" the upcoming supply.

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  115. No, you have it backwards Aaron.
    You want yields to rise so that bond prices drop to attractive enough levels for buyers during the auction.

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  116. EWT, thanks for the confirmation. Stayed short in the end - but was getting tired of the abuse!

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  117. wags,
    as the $ strengthens those yields will drop. thats what the fed wants. they want the market to tank. they did it in june and they'll do it again. they control the dollar and they obviously loaned out less today as that rally was pretty huge.
    look at the $USD chart. the slow stoch turned today and we have a nice candle on it. the dollar should continue to rally killing this rally hard.

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  118. I would beg to differ.
    Why would the Fed want to see the prices of Treasuries skyrocket right before an auction? That doesn't make any sense.

    No one wants to buy Treasuries at the lower range of yieldd. Thus, the higher the yield goes, the more "attractive" the Treasury Bond/Note becomes for a prospective buyer. That's just Basic Econ 101A

    :)

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  119. GO, we should at least have a chance to lock in some profit tomorrow if indeed there is still a V left. There is what seems like an Z or 5w moved down on the minutes and that will probably get us to the IV Dan drew. However, if those channels are broken, I think A is done already.

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