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Thursday, December 24, 2009

Elliott Wave Update ~ 24 December

All major indexes (DJIA, SPX, NASDAQ, WILSHIRE, QQQQ's) can be said to have formed a triangle B wave. The DOW included. And all have reached new highs which is a minimum requirement.

Lets take the most active triangle formation - The NASDAQ - and examine its possible targets.  I listed them on the chart and as you can see, you could easily count the targets as being met.  An important target in my eyes is 2295. That is where C = A using the lowest price in B.  There is no weakness yet on the RSI.  Doesn't mean there will be when its ended. I suppose there are a lot of TA types who are looking at the same type things.   No divergences = this price move ain't over by a long shot (or so one would think).

The most important wave point is that I very much think this is a "thrust" occurring and when that thrust is over, the P2 top will be set.

But to be honest, I don't care about divergences. I will use them if it makes sense, but I do not suspect that P3 has to start with a heavy divergence in place. In fact, I would rather think it doesn't.

The whole gist is to find the top of C.  That is the holy grail and that is where P2 peak resides.  That is the primary count.  Prices are expensive!   We want to take full advantage of that.

The Global Dow may be tracing a wave (ii) flat. I show this chart because it diverges with almost every other index and subindex in which triangles formed.   Also this is the one index along with financials obviously, that has failed to confirm the new highs we had today on the DOW, SPX and of course NASDAQ.

The SPX hit my upper trendline as I showed last night's update.

Another point is this:  Even though the market has rallied nicely for 5 straight days (with NASDAQ NEVER once going red) and bears completely frustrated, the S & P 500 is only sitting 1% above its recent 2 month trading range.  And now its overbought on the hourly. And its wedging. Thats still bearish in my book.  The same can be said for the DOW. Finally after 5 days of "rallying" it made a new peak finally.  you could even say the DOW is only at the top of its trading range of recent.

So the SPX has a tepid closeout above its 50% Fib after 5 days of light volume up trading.  The DOW is not any better. In this regard they haven't broken out decisively yet.  When REAL trading and volume gets back in the market after the holidays, will they hold support?

I realize that the market can just keep moving up next week on no volume. No problem. But it is no guarantee.  I suppose if it goes up next week a lot more, you'll hear all the usual lurkers saying "I told you so". Whatever.

The transports can be argued to have an expanding ending diagonal occurring with its peak today. I really don;t know how else to label the whole thing if we consider this an Intermediate zigzag. On this chart there is significant weakness in the RSI and MACD.  So I'll mark it has having topped.

What is the lurking danger to all the bulls world over?  Debt problems of course!  The 30 year bond is having a nasty red candle of a month of December.  Some would like to say its because they are taking risk, etc. Perhaps they are correct. It appears to be heading to a wave [1] bottom.  What would cause wave [2]? Ok, lets play the game:  A flight back to "safety".

LOL!  Debt problems causing all the problems and people flock to "quality debt" in T - bonds.  One day they will realize how utterly insane this really is. And that moment is not too far off.

Besides is can be argued that the whole thing is a not-so-clever Ponzi:

And do you know what happens when Ponzi's are realized? They collapse rather quickly.

Merry Christmas!
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