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Wednesday, July 1, 2009

Ellliott Wave Update ~ 1 July

Its a tough read at the moment. I knew this moment in time would come. When the market is tracing complex WXY waves of some sort with multiple subwave complexities.

So today's top could be a b wave peak of some kind today. Or the official end of a Minor Blue X wave.

Or it could be a part of a [b] wave in a running triangle and tomorrow is a new high yet again Recall the correction of most of April where the market drifted sideways and chopped up in a running triangle before breaking out to the upside of 875. Same could be happening here except with the 950-955 level. The final Minor blue Y wave of an WXY correction from 956 peak could take that form.

You might call it a wave 5 move on the NASDAQ and SPX but the subwaves are terrible for that to be the case. Also the DOW certainly is not a 5 wave move up from its low.

So the whole thing rather stinks. However falling back on the technicals, there is now negative RSI divergence on the hourly charts. This is confirmed by the ROC, MACD and CCI indicators. The e-minis show even more negative divergence, all hours. I don't think today's downward slant after the early peak relieved the situation enough.

But to be honest, I have no good read on the short term waves worth getting excited over. So we'll just have to wait for it to resolve.

As a side note the DOW is finally ready to have its "golden cross" moment of the 50/200 crossover, the last of the indexes to do so. That move often produces an initial bearish move. Then a bull move to recover the situation much like the SPX did last week.


  1. Daneric - USD continues to weaken with no end in sight. The dollar index try breaking 81 three times and failed. We shouldn't even be back at 79.5 right now. Do you think given where USD is at right now, the bias is to the upside for stocks? So I did a lot of thinking this week. I am bearish because our economy is in shambles and I am not a believer of this rally. Perhaps my bias has clouded my judgement from seeing the true price action... which is up? Thoughts, Daneric? Thanks.

  2. Darth that could be. Tops come when everyone is bullish. And that is not the case at the moment.

  3. Daneric, Also, if you adjust SPY for USD, you will see that we NEVER made a high back in June. In fact, this past 2 months is consolidation, which is consistent with Wave 4, so a push to 1050... maybe even 1200 if USD continues to weaken is possible. I had this chart for a while but don't believe it. Kept shorting into this market and got burned more often than not. I just think it's my bearish bias that's preventing me from seeing the "true" price action. Maybe....

  4. P2 will defy logic.....and kill all bears in its way...........hehehe..thats its job.....great work and great commentary dano

  5. I don't think they can get "us" to be bulls until the underlying issues have been resolved. As far as your average person, they just don't care anymore. Their money is no longer in the market and if it is, they just figure the market is appropriately priced and the low is in. It does not mean that they feel that the market is going to make new highs (+956). The market is controlled by little black boxes. The only way they will stop is when there is no more liquidity for them to take out. I guess we will see soon enough (hopefully). Great work. Your charts are awesome.

  6. Daneric, if you draw a trendline from the June 23rd low on up and connect the dots you will see the channel we are trading in and closed just above today

  7. ckeltner,
    And it looks to be wedging.

  8. Matt - That's what I've been telling myself for the past 3 months. Everytime market looks like it's ready to break, PPT steps in. But I did an excercise this week and I think you should to. What if we are wrong? If you noticed, on down days (even the ones we are down 2%), we trickle down on light volume and little momentum. On up days, they are powerful although underlying fundamental reasons make no sense. So If you were a fund manager, would you really want to lock in profits right now and 1) risk underpeforming index where there is clear appetite to long market on pullback to 880 and below and 2) be holding USD that is quickly losing value? Those were the thoughts I had this week and closed out all my shorts, because if anything, this market has proven to be incredibly strong and the USD incredibly weak.

  9. Darth- Completely agree. I do think that everything has an achilles heel though (even GS). At some point the prop job will no longer work and there will be a really bad down day or weeks. It may not happen for another year, who knows? All I know is I will no be buying anything but I will be taking shots here and there on the short side. It may not work out but why not try? Things are starting to fall apart real fast (unemployment, California, USD and our entire economy). We had what I like to call a "spring effect". Everyone has a bit of hope in the spring and that caused things to look a bit better. Now things are looking worse. The timing of a "fund" blowup is perfect for the summer. It is very low volume/ liquidity and that brings out any weakness in a fund. This may be the catalyst that causes the next step down. Good luck.

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  11. So far it seems to be like the peak at 931 is the peak of B, as long as the high today doesn't get taken out then the target should be 905. The unusual thing about it is how the wave extended, so I guess tomorrow we should find out.

    If you're a day trader, keep your stops tight. I've been riding these waves for couple of weeks without missing a single wave (with the exception of being stopped out couple of times) so I hope to strech my streak for couple of more weeks. One thing that I caution people about is not to be emotionally invested by being too bullish or bearish, one should let the market tell you what is doing. Our opinions as far as fundamentals, etc. are essentially worthless when it comes to short term movements and to apply our logic and emotional bias is to set oneself up for big losses.

    And if there is a saying I really like from Warren Buffet is this:

    Rule # 1 don't lose money
    Rule # 2 don't forget rule #1

  12. 1. USD looks like its basing for a breakout.
    2. Everyone of any consequence has turned bullish. 99.9% of the investing public is bullish :). I would love to see these bearish people I keep hearing about. SKFers dont count ;).

  13. Hi Dan:

    Great work!.

    Your Spx from 888.86 counts much better thus:

    Green (w) to June 25 921.42 high
    Green (x) to June 30 912.86 low
    Green (y) to July 2 hi to 932-935 area


  14. >USD looks like it's basing for a breakout.

    I agree.

    >Everyone of any consequence has turned bullish.

    Just got back from the bar...had a fairly intelligent guy call me 'unamerican' and get angry with me for being bearish into the end of the year. Asked if I was a Republican. ;)

    The general public is overwhelmingly bullish...