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Thursday, September 17, 2009

Elliott Wave Update ~ 17 September

The wave evidence is gaining strength. The little blowoff top suggests perhaps Minute [iii] of Minor C peak was reached today. A break of the tight blue channel would help confirm but the MM's parked it twice on the line.

If my overall count is correct, Minute [iii] of C has so far expanded 1.358 of Minute wave [i], very close to a 1.382 Fib ratio. This expansion already guarantees that Minute wave [iii] cannot be the shortest wave which is an EW rule.

Wave 3's often expand in ratio higher than 1.382 with 1.618 being a common expansion ratio. 1.618 would equal 1090. If Minute [iii] is going to expand to a higher level it should do so immediately tomorrow and keep heading up. At the least, it shouldn't lose any ground since wave 3's really shouldn't be dawdling sideways for any length of time being that they are usually the strongest.

But that may be hard to do because tomorrow is quad witching. MAX PAIN for SPY is low $90's and it would make sense that the market gravitates just a bit down toward that mark somewhat.

My charts place Minute [iii] at today's peak. If the market makes a new high tomorrow, obviously Minute [iii] is not finished. Today's high would be just Minuette (iii) of [iii].

So if today was a Minute [iii] peak, what form would or could Minute [iv] take? One would think naturally a shallow and sideways wave which it could very well take. My chart shows the bearish option (I cannot help myself hehe) for Minute [iv]. That would be a 38% retrace back toward major support at 1044 or so. Maybe that takes a few days time. But it would allow some "distribution" and volatility on OPEX Friday.

So the structure is growing clearer and everything is currently "parked" at a decision point for tomorrow. Does it continue up to finish Minute [iii]? Will it meander sideways for a shallow Minute [iv] wave and hold higher supports? Or will Minute [iv] chop the market down to the 1040's and get the bears excited only to be squeezed yet again next Monday.

Minute [iv] cannot trace into Minute wave [i]'s price territory which is 1039. In fact it shouldn't come too close at all. But it could say retrace to 1044 and be a perfectly acceptable Minute [iv].

I lean toward the low 1050's or mid 1040's. But I have several reasons for thinking that way:

1) If Minute [iii] topped at only a 1.358 expansion ratio, I expect Minute [v] to be a long wave perhaps. Minute [i] was 60.96 points so far. Minute [iii] is so far 82.8. I would expect Minute [v] to at least equal Minute [i] is points. If Minute [iv] retraced to 1043, and if Minute [v] appoached Minute [1]'s point length (or even exceeded it in a blowoff top), that would put the market just near or over 1100.

2) Quad Witching Friday may not be conducive for a rally to a higher mark for Friday. That would allow a few of the recent gap ups on some stocks to get closed.

I haven't studied the technicals to tip the hand one way or another just yet. So maybe I have more later. But the waves looked more corrective today rather than impulsing down signalling a trend change. But the "corrective" movement has a potential bearish look to it rather than "triangle waves". Minute [iv] should take more than 1 day.

So there you have it. Yes I have up/down and sideways covered but thats the way its supposed to work in EW counts. You have to be ready for every direction and then when it tips its hand, you'll be ready for what comes after.

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