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Tuesday, October 20, 2009

Elliott Wave Update ~ 20 October

The count I have been showing lately works nicely as an 1100 top.
The nice round number is also kind of neat plus the SPX cash index gap was filled.

However I am not going to jump up and down insisting its the final SPX high. So for instance I show an "alternate" count on tonight's chart.

There are a few things that need to happen to confirm a high. 1) A solid break under 1080 support (and therefore closing the HUGE 5.5 cash SPX index gap at 1073.19 - 1078.68) would confirm an intermediate trend change. 2) In addition a 5 wave move down at an estimated Minuette (pink) degree.

Of course I think a key may be that the dollar finally rallies hard and breaks out of its long term downtrend line of which it is, once again, drawing near.

All the other markets are secondary in a sense for clues. The VIX was down today and, I think, in general that is now a good sign for bears in the longer run. Today's down move of 1% and the tepid VIX move indicates that the "Wall of Worry" is starting to fade on any market decline. Indeed prices are now expected to go higher this earnings season which can be characterized by the media as a rousing "success" so far. So I now take lower VIX readings as signs of market complacency.

So after 7 months of solid rally, a 60% market gain, all gaps closed, DOW 10000 being traded around, and now a "stellar" earnings season (if you listen to CNBC) , prices are actually under more pressure to go up than down. The big rising trendline is growing closer again and its up or die so-to-speak.

Shorts have been squeezed just about every which way. Is there any more squeezing above 1100 to be done? Or rather when 1100 was hit, the computers switched to "sell mode" (as I suggested the other night) ? There likely exists a floodgate of paper at 1100+. Slogging through to gaining above 1106 (thereby holding 1100) will not be easy. There are a lot of buying climaxes occurring.

I am inclined to think the market is ready for a big move down (and that 1100 was "the" top of P2). However, I entertain a new short-term high, but it doesn't have to be.

Its also interesting that the MM's opened the market briefly in the green rather than any silly gaps down. They covering their tracks at the top?

The waves impulsed down in a sharp corrective-funny kind of way today. Nothing stands out as either a 5 wave move or an ABC down for that matter....

I know I am a permabear, but don't you sense the bulls are about to be "surprised to the downside?" If not tomorrow then soon enough?

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