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Thursday, December 17, 2009

Elliott Wave Update ~ 17 December (Update:6pm)

Update 6pm: Added a 1 minute squiggle chart that shows a very nice 5 waves down so far.

Pattern recognition: Compare this chart to the one underneath it from last December 2008.
Ignore the secondary labels on this old chart (I was just learning to count) and just concentrate on the ascending triangle pattern marked in big red letters. Notice the sneaky red "e" that broke way under the a-c line and took its sweet time to play out. Yet we all know that indeed the market broke up high to 943 in early January. So this triangle turned out to be true. The "January Effect"....

Today was likely the last day of the year for either the bears or the bulls to achieve something significant in breaking this sideways impasse. The bears couldn't get it done. The real goal is to break the nearside pivot support at 11160 where the [c] wave is marked (1085 on the SPX)

Tomorrow is Friday and lighter volumes from here on out may ensure that key supports hold.

The move down today eliminated some options on some of the various charts and short term squiggles I have been tossing around lately. I toss a lot patterns around lately to get you to think about how waves can connect. I also have been showing a lot of indexes from the SPX, to the DOW to the NASDAQ.

But tonight, I am looking again to the Wilshire wave picture since the Wilshire consists of 5000 stocks. And what is staring at us is an ascending triangle on the Wilshire.

I think for triangles such as this to work effectively, it has to create enough doubt and confusion to a vast amount of traders to question this pattern. I too lose sight of the forest by looking at too many trees. Now tonight its time to look at the forest again.

The three main indexes, the DOW, the NASDAQ and the SPX and even e-minis now have enough variation between them over the short term sideways trend to create uncertainty. The DOW failed numerous times to take out its high recently (but came within a point) . The Nasdaq could be characterized as an "ending diagonal" look pattern that started in November (not that I have this as a primary count) and the SPX hasn't challenged its 1119 high. the point is, each index cannot be counted the same way. So it creates wide-ranging, diverse opinions and technicals. That may allow a triangle to follow-through.

So all 3 indexes seem to be sporting differing strengths and weaknesses and varied wave structures. But put them all together and you have the Wilshire. And what that pattern shows is a pretty decent ascending triangle.

So now is the time to monitor the Wilshire as this should show the direction of the overall market. There is a key pivot point, or where I have the [c] wave marked that cannot be broken for this pattern to be in play. Its that simple.

Notice last year's SPX chart? Its eerily similar not only in pattern and wave structure but in overall the same trading days are matching up.

Can the same thing play out? You bet it can. When each index has misdirection and doubt created than people tend to only pay attention to what they think is the key.

I also introduce the concept of what I call a "sneaky E". This is an effort by the market to fool people into thinking a triangle has "broken down" when in reality is has not. As long as the pivot [c] wave price is not breached, the [e] wave can drag on for longer than what may seem necessary. Just like in 2008.

So thats the call here: A potential sneaky [e] to play out over low volume holiday trading and then the New Year brings big rotation and new highs in many indexes.

The alternate count? That is has all topped of course!

Easy cheesy!

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