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Friday, July 3, 2009

Elliott Wave Update ~ 3 July

There are still many possible counts. I have a lot of them on my 15 minute chart. Take your pick. The good thing is that no matter what structure the market is tracing, the near near term possibilities should be similar no matter what the count.

Overall, my primary count is that the market is seeking a second Intermediate red (X) wave low. The form that the Intermediate (X) wave has yet to be determined but so far the best interpretation is that it is a "double three". The first part of the double three was a simple 5-3-5 [a][b][c] decline from 956 to 888. The interconnecting Minor blue X wave peaked at 931 and was a complex pattern. The form doesn't much matter at this point of the X wave. However the complex nature of the Minor blue X wave suggests that perhaps a simple pattern will now emerge for the Y wave. Alternation between simple and complex patterns.

The last part of the decline is starting to trace out now. What form the last Minor blue Y will take is unclear because we don't have enough pieces of the puzzle just yet. The door is still open and I don't think the market is even sure what it will do. Of course the "structure" of the Y wave will determine the price low.

On the squiggle level, quite the unusual wave down from recent 931 peak. Its almost "contrived" and the market was in a hurry to form a massive head and shoulders in the market which everyone can now see. What does that mean? It means everyone has likely taken their positions and that it will NOT follow through with its down target. But ironically, sometimes the contrarian position is that it WILL follow through. So I am agnostic overall. (gee that was a lot of help huh?)

One subwave at a time. The SPX hasn't quite connected its neckline (the DOW pretty much has) so Monday may bring some more early decline for the SPX. We'll see where the market opens. Then I'm looking for a backtest of 912 resistance or so in a retrace move.

One subwave at a time for now.


  1. If they know that we know that they know that we know, then it may or may not happen. :-)

    Sorry Dan, just had to say it.

    We respect your willingness to say "I have no idea what's going to happen next". Your hard work is appreciated in that your charts are incredibly useful even if all we can do is stare at them like deer in the headlights until a true direction is clear.

    Some people are betting big on a downturn... see Tim @ Slope of Hope... he went all in Thursday.

    Enjoy the holiday weekend.

  2. I do have a (primary) idea, its a Y wave tracing out to an (X) wave bottom. The form it takes I am not sure just yet.

    Then a summer rally to a P2 peak.

    I actually have some confidence in what Monday/Tuesday will bring, and thats a retrace up to at least 912 after this down move finds its bottom (might go a little lower Monday).

  3. Thanx for your hard work.
    I'm wondering two things:
    Might this not be a "Wanniski Market" rather than an "Elliott Market" in that everyone is looking for:

    A: a complete fracture in the "constant" that would allow a proper "wave reading". That is, the market is anticipating and following the advent of "Smoot-Hawley 2" - On days when the market goes up, it is perceived that the chances that the Senate will pass a "Tax and Trade" Debacle are minimized. On days when when there is some insanity on Trade Wars or something, everone stays out of the market.

    B. Elliot applied to the Fed itself: Helicopter Ben is another in a long line of "Correct the Money Supply up or down too late" people. I notice that the Wavers are now often looking at X-Axis, Independent variable, as time line, with a Y-Axis of something like Dow/Gold to provide a UNIT measure, since there is such chaos from the FED that any wave structure is mapped on a wave structure through a wave structure in time = MORE CHAOS.



  4. Informal survey of work and friends all say that they are expecting to get back in the market on the long side after a small drop. Given that this is in fact to most powerful BM of all time, there is not much doubt in my mind at this point that another rally will happen in order to pull in as many as possible prior to a very large drop when everyone leasts expects it. Prior year calendar also lines up with DE's analysis. Turn up was July 16, 2008.

  5. Every time the market forms a setup for a H&S or Triangle it is common to hear people say the market will not follow through because "everyone sees it" or traders are "already invested". The key to psychology at this point in time is not so much that everyone is already invested but that no one is willing to stand in the way with opposite positions. Cheers.

  6. Wow...everyone and their grandmother are expecting a small dip and another run into the summer.

    Thank God the market is so easy to play and game. I think I'll go all in on the next small dip...880 right???



  7. One more thing you guys are missing, and its a biggie.

    Insider selling was at a historical maximum last 2 months, so is the issuance of new stock. What all insiders are telling us by their actions is that this is a one shot deal. They are unloading everything humanly possible now, because there will be no 2nd run, there will be no 2nd chance. They are not holding back, they are dumping everything they can because they know they will not get a 2nd chance.

    So for everyone expecting a small pullback and a 2nd rally to S&P1000 or 988 or whatever...which by the way is exactly what bulls are expecting as well....

    all I can say is...the insiders are telling you its not going to happen :). In fact, what is more than likely is that you guys will be buying dips all the way down to new lows.

    Did you really think that P3 would be announced from the rooftops by PERFECT Elliott Wave formations, PERFECT technical retracements and by the EXACT expectations of both bulls and bears???? LOL :)....

    It will happen just like it did with P2. It'll already be half over before you realize we're in P3.

  8. >It'll already be half over...

    I'm sure that many readers on here are also NEoWave subscribers/followers. Neely isn't talking about a vertical wave 3 -- he's talking about a move exactly like you stated...people buying the dips all the way down as we gradually work lower and lower.

    From what I understand, Neely believes us to be in a very large triangle of some sort and the move down over the remainder of the year will be the low of our lifetimes.

    It doesn't really matter to me since I trend follow regardless of direction...EW just fulfills a psychic need to anticipate where we are headed.

  9. Re: William, you really sounds like an amateur who knows nothing about TA...

  10. William, go back and look at prior posts. Daneric called "P2" when it was less 10% into it...

    So u dont expect a summer rally. (im not conviced we get one either, i think there is a 50/50 chance that 956 was "it")....

    But insider selling...(as obvious as BEARISH of a sign it is.....) that alone as just one thing without any other signals does not = collapse immiment.

  11. Good post Daneric - Can you comment a little more about how you think move down was "contrived?" I was thinking same thing. This rally has been strong overall and the H&S just seemed to obvious. For such a low volume day, I was surprised PPT did not step in to prop up the market. Assuming we do break (as all traders right now seem to think), how low do you think we can go if we are to make a new P2 high before the real drop? Thanks, Daneric.

  12. On the minute waves I had the current move from 901 to 896 as a 3 wave after a zig zag correction, so I see something different. If that minute wave plays out (turns out to be a 3) then we should be hitting 888-903. And from there we should retrace back to gap resistance at 915 or very close to it, that would be an excellent point to unload longs and load up on shorts.

  13. It is evident from the past updates in the last three weeks, the Oracle whishes for a triple ziq-zag for [P2], perhaps a fixation to achieve a personal investment strategy (good for him) . The 842 Magic spot must hold for the third zig-zag to play out. However, I see the much talked about H&S is actually of the complex type and not a simple formation. Indeed, the first of the two right shoulders has been cemented around 931 and now a test of the neckline is being carved out. We shall see a retrace to the gap resistance around 920 (formed Thursday’s close and Friday’s Open), we might over shoot the mark by 5-7 points); therefore, drawing in more bulls (to the call side) till Option Expiration date. At which time the hammer will be dropped to bring down the neckline and accelerate the move down to around 820 ranges. I suspect Mr. Dan will look back and redraw all the squiggles as a Sub-Wave 1 of a [P3] = (956 to 820) about 136-140 points. How is that for an alternative point of view? (yes, I am play it this way.) Vote for this one if you are a Perma-Bear or vote for Mr. Dan’s if you are a Bull of Hope.
    How knows, I am only the Studen_Sitting-In_The_Back.

  14. nice work dan. as always.

  15. Dan, once again, I’d like to thank you for your hard work in labeling the waves in a very disciplined way. They are invaluable to readers like me.

    As pointed out by you, Kenny and others, there are really two possibilities of wave counts: the bullish and bearish counts. If the market breaks above 932, the bullish scenario is still alive while if the market breaks below 880 (+/-) in a convincing manner (~2-3%), the bearish scenario will be confirmed. We won’t know that we are in “P3” until we are very much in “P3”.

    Right now, the market does look like impulsing down, which we haven't seen for a while. If this motion continues and breaks 880 (+/-), 956 could be our "P2" top and we could be in "P3".

    From my experience, EW counts need to agree with the basic principles of key support and resistance levels. The problem is that we won't know the actual (“right”) wave counts until they happen. I have been burnt before sticking too much to the "perfect" wave count because unfortunately, the market will let you know the "right" wave count after the fact. LOL, Richard

  16. >won't know that we are in "P3" until...

    The detractors of EW will tell you that it works after-the-fact but can't be traded well (e.g. Al Brooks). I've had the best luck trading NEoWave style -- higher timeframes and large stops.

    >Vote for this one if you are a Perma-Bear or vote for Mr. Dan’s if you are a Bull of Hope.

    Dan has the best publicly available charts that I've seen. Whether you consider his count preferred or alternate, it is well reasoned.

  17. Gentlemen,

    if you want to see what our P3 may look like...i will refer you to the NASDAQ December 2001 - August 2002 Chart.

    The run that NASDAQ had from September to December 2001 was technically virtually identical to this one. You may find what happened from December 2001 - August 2002 very illuminating, both with Technical Analysis and Elliott Waves...

  18. Let me elaborate...if we follow NASDAQ's September 2001 - October 2002 journey:

    Wave 1 of P3 could take the S&P to 800-820, Wave 2 will be a bounce back to 900. This is the point where all the sideline money waiting for a pullback and 2nd run are piling on like mad. But they are wrong. They are the 2nd batch of sheep to be sheared. For you see, you cannot bailout the 1st batch of sheep stuck at 930-950.

    Wave 3 will take S&P from 900 to 550. This is the soul-crushing one. Wave 4 is a rebound to 720, Wave 5 takes us back to 450-500.

    Again, this is loosely based on the pattern and % moves...that NASDAQ traced out in 2002

  19. William,
    What would your loose timing of this be...thanks

  20. You'll have to check the NASDAQ 2002 chart to see how long it took for all those steps to play out...I would post a chart, but i'm unable to cut and paste on this..

  21. Forget that lol William. You shouldn't use NAZDAQ 2002 chart for comparison...

  22. Michael, what're your experience with NEoWave? Are their trading/forecasting services of benefit to your short term trading (e.g. 2-5 days, 1-3 weeks)? Do you have to understand Neely's book on Mastering Elliott Waves to fully utilize their service? Is the Neely method (rules and guidelines) of counting waves very much different from the R.N. Elliott method? Thanks, Richard

  23. Richard, the NEoWave S&P trading service gives you explicit entries/stops/exits on ES for hourly, daily, and weekly charts. The hourly trades are in the time span that you mention.

    Typical stops for hourly entries are 20-25 points, with the current entry large at 40. He's short, of course. Neely's projections for this wave align well enough with William's post. Not sure why Dave finds it amusing...we are living in interesting times.

    I've been a subscriber since early October. I've pulled in a few hundred points during that time, so it's obviously worth $40/month to me.

  24. Michael, thanks a lot for your reply. Sounds like the NEoWave trading service is more definitive than the orthodox Elliott Waves in which we have to consider alternatives (bullish and bearish cases). You must have caught the entire bear market rally! Richard

  25. Richard, the trading service is out of the market most of the time. Neely doesn't try to use Elliot wave on charts of less than an hour--he has another system called Neely River for shorter-term trading.

    The biggest move that I caught was the second half of the slingshot out of the March low. That was a 70+ point trade. Most of the other trades were 10-30 points each. Over the last three entries we've been breakeven as Neely tries to catch the top for what he expects to be a 400 point trade.

  26. Michael,

    What does Neely recommend you use to trade? Is it SPY, SDS or E-Minis? Thx!

  27. Michael, thanks again for your info. I agree that in a bear market rally, it's a good idea to be out of the market most the time (either long or short) so that we don't get caught in the wild swings. We should take profit relentlessly! Please keep in touch. Richard

  28. You said it all Richard. There is an old saying..."everyone loses money in a bear market".

  29. Rick,
    how do you see tomorrow ?
    do you play it from the long side ?

  30. Alex, this is Rick. I think we will move lower until we hit support in the 888-893 area and then retrace back to 912-915. Right now the futures support that view, it might break support if selling is intense.

  31. Going long and closing shorts at 891

  32. Seems like it was a wave 3 from last week.

  33. Rick are you going long now ?

  34. Yes at 888 but I am stopping out again if that gets hit again.

  35. so you don't feel too confortable ?

  36. I just like to raise my stops and keep them tight. But I'd say is a safer bet to go long now, probabilities are in favor of a counter rally.

  37. This feels like wave 1 now, if it is, we should be hitting gap resistance. Takes balls to be a day trader but the rewards are immense.

  38. well done Rick once again
    you plan to stay long till we reach 915 ?

  39. Yes 915 is the number is the ideal number. But I am reading to dump longs and short again at a moments notice after 903. The larger trend seems to be down for now. I am going to start charging a subscription fee :)

  40. you should rick....
    great to learn from a true professional like you. today did not have enough courage to go long