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Friday, September 18, 2009

Elliott Wave Update - 18 September

I am not satisfied with my squiggle or near term counts of this rally over the past few weeks. But it doesn't matter as no matter what the count, it all implies the same thing: We are nearing P2 peak.

So you have to go with the count that fulfills the most guidelines and its seems the last few days are tracing a triangle (or a false triangle) in some kind of wave 4. Its either Minute [iv] or Minuette (iv) and I lean toward Minute [iv]. Reagrdless the sideways action implies consolidation and corrective waves for further up moves.

As far as today, the squiggles traced an ascending triangle on the DJIA, SPX and NASDAQ so it was consistent in that regard. It would have to head up fairly quickly on Monday to fullfill the triangle breakout move. The triangle looks a bit skewed so I am not sure if it will pan out.

But nonetheless, there are no impulsing waves down. So the last 2 days of trading was corrective in nature.

What happens Monday and how it happens will strengthen the overall wave count. I am agnostic on how Monday plays out. Because of the intact triangle, I guess I am leaning a quick burst to a new high and a bearish retrace toward the 1050's at least by Tuesday. But futures will determine where we open.

Another thought is a gap down fulfilling a (c) wave of a Minute [iv] of Minor C by Tuesday. Eventually the market rallies and makes a new high then sometime next week or the week after fulfilling Minute [v].

Some other passing thoughts is a concentrated burst that carries the DOW to 10000 and that's the P2 peak in the next few days. However the candle patterns do not suggest this will happen. A doji and a spinning tops with uncovered gaps just below.

Or perhaps a long meandering complex double three wave consolidating under 1074 yet holding the key 1060 level for a longer Minute [iv]. Then a breakout Tuesday for the start of Minute [v]. But I digress. I am thinking in every direction because the market is at another crossroads.

And it will be every day from here on out as long as bullishness keeps making new highs.

Market internals are going to be very important next week. Volume both up and down will help identify what is happening. So along with wave patterns I will be looking at a lot of things to try and determine what may be happening.

One thing I do know is that bullishness if reaching an all-time high on the $BPSPX chart. The dollar is reaching an all time low.

Everyone keeps saying everyone else is too bearish which is why the market keeps going up. That may be true, but at some point it will turn. Even the permabear technical analysts seem to be agreeing that there is little resistance from here to 1200. Or that the inverse head and shoulders seems to be fulfilling above 1200. They see trendlines being broken through and held as support. They'll tell you they are bearish yet their charts make them bullish.

I personally think all that crap will fail. The "gained" trendlines will be torn asunder. The "easy resistance" will become a wall somewhere where no one expected it (1075?). The "strong technicals and all the crappy MACD crossovers and the 89 week moving average or whatever or the monthly stochs crossover and passing midpoint on the BB.....and all the other bullshit will fail and fail miserably. That is the nature of P3. It will trump your "bull market TA".

My instincts seem to be telling me to stop looking at trendlines, stop looking at RSI's, MACDs and other stuff so much at this moment and concentrate on what the market's price action is telling us and how it is being achieved. Its time to get in tune with the waves.

The few indicators I will concentrate on is volume, advance/decline, breadth both up and down and the VIX and of course bullishness.

Speaking of bullishness do you see all the upgrades coming out of the woodwork? It figures Wall Street never changes their tune. Its smelling like distribution time and they need every reason to hand billions of shares of overpriced stock to Mom and Pop and daytrade retailers.

But I am not so sure the "public" is so gullible this time, hence the public sentiment survey is not as great as one would expect although that may change this week. The institutions will no doubt be holding the bags for the most part . You can fool me once (2000-2002 drop), fool me twice (2007-2009 drop) but three times you can screw your Wall Street shenanigans is what the public may be saying. However...greed is a powerful emotion and people cannot help themselves. They will buy the rally top, but not necessarily in great numbers.

But what would suck them in? Seeing DOW 10000 no doubt is an eye grabber. So the Market Maker's will tirelessly work the tape, the motion is still forward.

But P2 and P3 may not end nor start so predictably just as Wall Street has always done. Maybe no big rollover patterns. The 1987 crash looms large.

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