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Friday, July 31, 2009

Implementing Disqus

I think it will help organize comments. I was fearful of trying cause I am not so good with this managing a blog stuff, but it was actually not too bad to install and we'll give it a go.

As many of you know, I have a boring regular 6-3 pm type job and really cannot participate unless I'm off work.

PS - I now also use Google's Chrome browser and don't get those annoying blog crashes that a lot of us were getting with IE on various Blogger blogs.

PSS - I am generally a "leave it alone" kind of guy, and I don't like playing nanny to comments. All I ask is that you refrain from personal attacks on others and although I cuss like a sailor sometimes at work I try not to on my blog. The bottom line is I won't let it turn into a Yahoo board.

PSSS - I toggled the Facebook and Twitter code. Lets see if they work.

Elliott Wave Update ~ 31 July



There a lots of ways to count the moves from the Thursday high of 996. My squiggle chart shows just one possible way. I do like it best though. I am putting myself on the line by charting this squiggle count because it implies that Monday could be a breakaway gap down opening that might not look back or perhaps a quick pump (fulfilling a small subwave up for black ii) and massive dump. So again, buyer beware and do your own diligence when it comes to interpreting the market moves!

The leading diagonal I charted often happens off the top of significant market tops. It forms because there are still laggard bulls rushing in at the end. Yet the subwaves of the leading diagonal are clearly impulsive down. Today's lazy subwaves up is also more late-comers to the party. Its the end of the month and lately the "new month selloff" has not worked. However the market likes to alternate so we may now be due for a start of the month selloff.

But again, the important part is that the market is starting to clearly sport some clean 5 wave structures down and that I think is cluing us in on the change in direction. It hasn't done this since the 869 low so its a bit of evidence that the corrective Minor B wave has started. Monday should give confirmation. If not, well sheesh....bulltards hehe!

Thursday, July 30, 2009

The QQQQ's and The Great Asset Mania









The qqqq's are where America's retail (and institutional) investors pour forth all their "asset mania" bullishness. And why not? These are the companies that have the cool toys that the investors themselves play with. These are the companies that have piles of cash. These are the companies that are in no danger of bankruptcy.

The Great Asset Mania, as Robert Prechter (founder of EWI and co-wrote the definitive bible - Elliott Wave Principle) likes to describe, greatly manifested itself in the tech stocks of the qqqq's in 2000. Unheard of sums of money were being paid for stocks of companies that never earned it nor deserved it. If anyone has doubts about the basic tenets of EW's (social mood is what drives the market. Not news. Not fundamentals!) look no further than the proof of the great 2000 peak in the NASDAQ of which the qqqq's was the driving sector.

But of course the asset mania popped a bit and the qqqq's fell hard. The hard fall down to the 2002 low shook out all the crap in the NDX and all the frauds and other non-performers. A great cycle b wave rally ensued for many years and the big tech survivors grew lean, strong and innovative and earned piles of cash (I speak with broad strokes here of course). And investors rewarded those companies such as Apple and Google by bidding up their stocks to much higher P/E levels than other indexes or sectors.

In actuality, the great asset mania diverted itself to real estate and another great bubble was blown. And the qqqq's, in their 5 year run from 2002-2007 only managed to regain a percentage of their lofty highs of 2000. Yet still, stocks such as Apple peaked at $200+, Google at $750+.

What do stocks like Apple bring you? Not much except one thing: you hope to sell it to the next sucker for a higher amount. The love affair with high tech still lingers from 2000. I hear retail-types at my work talk about how great a time it was and how they all played the market. Of course they all have stories of woe and how they all lost a bundle!

After all, the products and services produced by these companies are what the everyday retail investors sees and uses the most. Apple, Google, Amazon...they see and use these and they invest. So the asset mania does not die easily. Yet the long term waves also shows that it does wane. The qqqq's are nowhere near their 2000 high (nor 2007 high) and are in danger of more hard down moves. These down moves will represent the final dying days of cycle wave c of supercycle wave (a) of the great asset mania.

When people realize that buying Apple at $175 is not a good thing if no one is willing to buy it at $180, eventually all things reach their limit. What choice do they have but sell?

So getting to the charts I have posted , first, the qqqq's are in the same basic count as the SPX: A triple zigzag to P2 peak. I have their P1 as truncating. It makes sense: If any sector was going to truncate at the P1 low, it would be the qqqq's. They did have a hard down wave (3) of P1 afterall and they represent the leading edge of bullishness. From the daily you can see where a ton of resistance overhead will be approaching. Basically it should stop the qqqq's. Once the qqqq's are stopped, they will signal the end of P2.

For if the best, most cash-rich sector who is still the object of remnants of the great asset mania and the source of speculative $$$ and bullish sentiment cannot advance through resistance, what sector will?

From a monthly standpoint you get the picture too. Again, look at my long term NASDAQ zigzag Supercycle wave (a) and you will realize that the qqqq's will be a big part of this decline.


The last P2 rally in the qqqq's retraced a hair over 61.8% Fib. The current rally is over 50% now and it may approach the same mark in one last fit of bullishness in the final Minor C wave of a triple zigzag. But technically, the qqqq's will be stopped. In addition, by EW theory terms, the qqqq's will be stopped and the great asset mania will burn out lower in cycle wave c of supercycle wave (a). Things are not good out there in the economy at all from my perspective.

And years from now when the great asset mania seems truly dead and buried, it will live again. Not at the levels of our greatest manic period but it will produce some nice uplifts. Our children and their children don't learn from our "mistakes". Nature rules the human species as a social unit.

I don't chart the qqqq's much but I never take my eye off of them. They are, indeed the spear point of the remnants of the great asset mania.

If you liked these charts hey, become a follower cause Kenny is trolling for more and surging ahead of me!

Elliott Wave Update ~ 30 July (Alt added)

The e-mini chart was added as an Alternate count.


UPDATE: 5:17 PM I added an alternate count using the e-minis. It would be one last squeaker to a new high.

The waves count nicely as complete for Minor Blue A. The sub waves since the 996 high are impulsive down (yet they only form a nice zigzag at the moment - need more down to confirm this isn't just a last corrective pullback before a squeaker high). The upper trend line was hit perfectly. 1000 was not hit (expected!) yet and the old gap from 1007-1001 or so remains. Negative divergence on the daily, a first for this up rally and expected at the top. VIX remains elevated and looks actually ready to move higher.
Bullish sentiment is challenging P2 rally high.


So Minor B pullback is imminent and I believe has already started. I'll be looking at support levels and such but eventually I expect the 950 area to be reached in a major back test of support. The 38% Fib retrace is at about 948.

Wednesday, July 29, 2009

Weekly RSI Channel


Quite a rally indeed for Primary Wave 2. Sentiment is shifting back toward bullishness. I expect bullishness to challenge the highest highs of the 2003-2007 rally. But sentiment cannot mark the top, it only helps confirm where you are at in the wave count.

One thing I regularly tracked toward the final months of P1 was the P1 RSI down channel. I predicted it would diverge and indeed it did by quite a lot.

P2 has now rallied long enough to form its own RSI up channel and it is tighter than P1's down channel. To me that is not unexpected and confirms the sharpness of the rally. As much as I was rushing p2 early in June, I must admit, I was wrong to rush things. If P3 is to come, it should start from a proper RSI mark that is high enough not only on the daily and weekly, but monthly as well. I suppose its a basic TA tenet that all major turns display negative or positive divergence in some form or another at the weekly level at least. If there is one turn over the last 100 years that doesn't its just that I haven't looked hehe.

From an EW standpoint that totally makes sense as the subwaves or wave 5's are supposed to be weaker than previous subwaves in strength. That weakness that often marks tops are reflected in the RSI.

So I have thrown together my first P2 RSI up channel chart. What will mark the top of P2? When we start to see negative divergence on the weekly. I am convinced now we will. I shouldn't have ignored this suspicion but I will no longer.

It may be that the negative divergence is very small but it will be noticeable nonetheless. If your a fund manager or just a trader, and you see a small smidgen (yet clear) of weekly negative divergence on this total disbelief rally with fundamentals and the state of national debt in such precarious shape, what would you do? Bet on more upside? Or get the hell out?

Elliott Wave Update ~ 29 July


More zigzags. Very complex patterns today. Particularly all hours on the e-minis. But it held support. So the market has indeed managed to tread sideways at about 869 support. The daily tick has corrected down and as EWI pointed out tonight, the RSI on the hourly is "resetting" to "neutral".

The one thing that really captured my eye is the SPX:VIX comparison is misaligned. The VIX has risen the past few days http://danericselliottwaves.blogspot.com/2009/07/vix-and-spx-out-of-whack.html yet the SPX has not dropped accordingly. Dip buyers.

So its reached the point where something must give way: either fear or price. And price has been stubborn so that would mean a big drop or "relief" in fear will signal an opposite SPX reactive move above 980 and a run onward to 1000 and maybe even a small bit above with some squeezing.

The VIX rise has meant traders are more uncertain where prices are heading short term. Its like someone who is scared yet doesn't run away. The SPX is experiencing a pang of fear yet the prices don't run south (yet). Eventually, that scared person realizes they are just ok, and they lose the fear and continue on. Hence the SPX may lose that fear and break on through above 980. Of course the opposite could happen: The scared person does eventually "wake up" out of his frozen state and runs away.

But the market's waves haven't yet signalled that it will turn south a bit. Today traced more of a wedging pattern that typically marks the ends of short term corrective periods. Regardless, the market cannot tread sideways for much longer between 969 and 982. Something will give tomorrow either way.

People at my work know that I generally am a stock tracker and I had 3 people in the last two days mention they wanted back in more or less or was thinking about it. We are likely entering the "public participation phase" from the rally from the March lows.

I'm still fairly confident we'll get that pullback to at least 950-956 not too long from now, however I am unsure from what price high that will occur from. Yes, I favored the bears a bit the past few days and I was generally correct: 2 red days (though small on the SPX). Now the price and wave action, and correction in indicators and maintaining support means that objectively speaking, it appears the SPX wants to pop higher. But sure thing it is not.

Good luck cause anyone entering a trade here has balls to play it either way and my hats off to you. I am not in a hurry. I'm a permabear afterall and actually hope we pop higher, because it will provide more clarity in a swing trade setup.

VIX and SPX Out of Whack

Something has to give to relieve the pressure or divergence between the two. Either the VIX must drop sharply and the SPX breaks above 980 and heads higher, or the SPX will break down below 965 and matches the amount of fear rise that seems to be occuring.

At the moment it is a tough call. But looking at the VIX chart, I'd say it might drop and fill a gap.

It is P2, so bulls get the slight edge. However I'll sit and watch and let the big boys figure it out.

Tuesday, July 28, 2009

Elliott Wave Update ~ 28 July


Nothing too insightful to add to the mix tonight, just ramblings as usual. The triangle is intact and lots of zigzags up and down. No clear 5 wave moves either way (other than the subwaves of a lot of 5-3-5 zigzags). It looks and acts a bit on the weak side but I cannot say whats going to happen. I thought an early pump and dump would happen today and indeed it did spike and then sold off a bit, but still nothing too awful and buyers kept on buying the dips.

Triangles like these are a bit unpredictable as they happen so high up in the rally that they signal the final actionary pattern of the move. This one is not a tight one either. Its more on the distributive side of things to describe it in a way. So in any case, the move is almost over. B wave should be coming in some form or fashion. Whats not clear is how much buying power and squeeze power do the bulls have left in them. Its not even clear yet that the triangle will prove itself to be a triangle.

A 980 break to the upside will take some volume. Volume picked up today indeed yet it only managed to produce a "hanging man"-type candlestick pattern. Longer-term technicals are indeed bullish, but bull market this is not just yet. Its just the sharpest rally yet of P2 and VIX, in case you haven't noticed is still mid-20's not sub 17! So a down move can come out of the blue once all the buyers have been exhausted. And believe me the MM's will rip your face off in a slick 30 - 35 point move down if they can get away with it. There are stops to the underside of 969 that are growing too comfortable. 950 - 956 support has yet to be tested.

Even if the SPX makes a break above 980 and tests higher targets, I don't see 1000 taken out or held prior to a pullback. It may be tested, and if it does, I look at it as a tremendous opportunity to go seriously short this thing and look for a move back to 956 at least. But 10 points shy of the obvious seems to be the way the market works and 1000-10 = Kenny's 989 target.

Also there is a H&S in play on the SPX after all. We'll know more by morning. The e-minis don't make a good triangle they actually topped early on at 984 overnight a few nights back. They are actually more in a H and S mode more than a triangle mode.

Monday, July 27, 2009

Elliott Wave Update ~ 27 July




Ending diagonal or wave (iv) of [v] triangle? For the SPX and DOW, I think the ED works well. the NASDAQ may be in a triangle.

Either way I'm not going to get too worked up about it all as both patterns imply we are near the top of Minor A.

So whats the difference between and ED and a potential triangle? I think an ED could be a pump and dump. An Ending diagonal can collapse hard and rip the bulls' faces off at least for a day. I smell a day like that coming. The MM's have had their way with shorts and I see the CPC is again low so we are due for that B wave pullback.

If its another wave (iv) triangle, then this thing could take 980 and using it as support, launch a run higher up into the low to mid 990's, perhaps an assault on 1000.

So the difference between an ED (pump and dump) and a triangle (5 more small subwaves to a peak and it could run for another day or so) is in the degree and price targets.

I see lots of negative divergence happening so I lean toward a quick pump and dump ED scenario. But be aware of both patterns.


e-minis

Maybe an ending diagonal playing out. That would explain the zigzag-looking up moves on Friday.

Sunday, July 26, 2009

Long Term US Dollar

Kenny has shown some recent charts of the long term dollar chart. My long term differs a bit as I see an [A][B][C] down from the 2001 peak whereas he sees a 5 wave structure.

So in general we see the same short term moves upward but how far is where we differ. My count supposes that the dollar will actually break above its 2001 high in some kind of 5th wave Cycle (I don't have access to extreme long term counts here) or other such count. He just shows an ABC correction up.

I like my count for several reasons. One, the dual channels seem to spell ABC rather than 1 -5 down. Also [C] is almost .618 times [A]. I also tend to think the dollar low ended in a truncated mess. And his Primary 1 and 2 look very small and out of proportion to the rest of the structure the way it is labeled. For being such a large waveform, I think it is a key point.

However, I do see the [B] wave as an expanded flat. One can almost make a running contracting triangle out of the move, but it doesn't quite count within EW rules.

One other thing I don't think the dollar will necessarily turn exactly when the SPX turns. It is also hard to see when the exact bottoms on the dollar will occur in what I have as a wave (2) low.

I think, more than ever, we should be seeing extreme bearish news on the dollar before a turn back up. So far, I generally don't see the "extreme" media stories proclaiming the dollar's doom. Sure they are there, but I'm looking for more downside. Indeed this last wave [v] move down could challenge very low. But regardless, I do see big move back upwards in a powerful wave (3) rally. It doesn't have to time perfectly with SPX primary 3 down. It could for instance, rally up to a sub wave 1 and then retrace in a 2nd wave sub move just when the SPX is peaking on a P2 top.

Anyways that's my general thoughts on that at the moment.

PS - I don't really pay attention to what EWI has as a $ count. This chart I just made up tonight completely on my own. It seemed easy enough to count and the chart generally took less than 30 minutes to complete.

PSS - There is a great positive divergence on the RSI. So indeed it may turn back up hard soon enough. Its hard to say exactly how the micro waves wil trace over the next month. But make no mistake, I think this chart portends the dollar will make great advances upward contrary to what most people assume.

Citibank and the Banking Laggards

I showed you how the banking index is looking pretty weak in comparison to the rally over the last 2 weeks.
http://3.bp.blogspot.com/_TwUS3GyHKsQ/SmpxRzhr2zI/AAAAAAAABLc/vSku2u_goo4/s1600-h/banks.png

What really caught my eye about the banking index charts is just how much out of whack they are getting as per the SPX. Banks are seriously lagging in these past few weeks. Look at the recent gap between banks and SPX on rally performance. You can see it on the banking chart.

However the gap between the SPX and banks needs to be reconciled in one way or another. I suspect that the SPX will begin to pull back in a B wave and the banks will slowly close the gap as a rally laggard and may not drop as much as the SPX and start to show positive divergence. The combined effects of both price actions will close the banks versus SPX gap and then when the SPX B wave is over, the banks will indeed finally lead the last rally bid to P2 peak.

BKX may or may not make a new high, I am not certain.

That brings me to the Citibank chart. It also is due to catch a bid. It may have some very short term weakness down to the sub $2.50 range briefly, but if P2 is to continue on, C looks like it is ready to catch a bid sooner or later. The continuing positive RSI divergence is what caught my eye on C.

C is just a short ride back down to penny stock land. But before it does that, I think it has "one last hurrah" rally up prior to P3 starting. Other banks may do the same.

The NASDAQ Count


The NASDAQ is achieving wonderfully some very satisfying Fibonacci retraces for Primary Wave [2]. It has surpassed the 38% retrace mark. At 2066 (still a ways to go!) it will have achieved a 50% retrace.

At 2150 lies a resistance zone that will be hard-pressed to penetrate.

Yes the NASDAQ seems to lead this bear market in its rallies but then again, people are enamored with these stocks like Apple, Google and what not. After all, they are flush with cash! On the other hand, the NASDAQ will also likely be the canary in the coal mine and when it reaches an impenetrable resistance layer, it will likely flash weakening signals to the P2 rally as a whole. So far it hasn't been stopped.

I might add that the whole thing looks like one gigantic rising wedge. This P2 rally never had a 38% retrace down (and I don't think it will - P2 should top without ever having a 38% retrace). Its never been tested. It seems to be in a hurry to get what it can when it can.

I must say, technically P2 will look bullish. The NASDAQ is starting to flatten out and turn upwards its 200DMA, which will happen to some degree. The SPX is not far behind. Some technical things will happen that will proclaim a lot of people to turn bullish. It will then remain to be seen if this can translate into more price rises through maga-resistance layers.

I do not portend that my rally count thesis must be perfectly correct. There is room for other interpretations. I however am still confident that that's all it is: a bear market rally, albeit the greatest just about in the history of the stock market. The subsequent drop will also make history. That is the theory. A Primary Wave 3 in a cycle wave c down is supposed to be the baddest-ass wave of them all.

Many hard-core bears are no longer believing that to be the case. Persistent price rises will do that.

Friday, July 24, 2009

Its About the Banks


Bull market talk! Loads of it. Just 2 weeks ago, they were talking opposite! P2 is working its magic I can tell by many commenter's reactions as of late. But bull market it is not. But in the meantime, doubt will creep in and bears will break.

The banks however tell the real story. Since achieving a high in early May, they have limped. Even after all those great "earnings" reports. The stock market never lies. Appetite for banks is low. Banks have issued so many shares of worthless paper its scary and sad at the same time. I suppose the banks will eventually catch a bid. The 50/200 is ready to crossover soon.

Its always been about the banks. It always been about the debt. Parabolic rises, no matter what they are, will collapse under their own dead weight. 64 banks closed this year. The pace seems to be picking up. This is real. The Great Bear is real.

Government can "save" us. Ha! Government is the ultimate consensus group and the last to react. They follow. They will save the banking system only after it has already completely failed. They will fix the nations massive deficit problems only after the debt has been destroyed by natural market forces.

California is issuing IOU's. How can we support $500B in interest payments a year? Its madness! Yearly debt at $1.7 T and thats with great interest rates! The shadow banking system will eat us.

So what happens if interest rates rise to 15%? 20%? Oh there will be a P3 folks.

And they won't be buying stock, and there won't be any "safe haven" in debt. Risk aversion will be the norm. P2 is the last-gasp asset mania bubble the world will blow in many decades. We can only wonder when it will end. We try and connect the patterns.

When those "fund managers" require cash because deficits and budgets and payouts demand them, they will sell. The fear will rise again. The mad rush to the door this time will crush a lot of good people.

VIX waves


Short term 5 minute VIX chart ended nicely in a picture perfect wave (v) ending diagonal move.

Ending diagonals, in theory, result in sharp moves up. That and a pretty good positive divergence on the hourly chart spread over many trading days should pay off.

Some Alternate Squiggle Variations




Kenny posted a squiggle chart http://1.bp.blogspot.com/_goypolxEFd4/SmoR_3apjSI/AAAAAAAABXM/sd68dY9W33c/s1600-h/spx1min.png

It presents the up moves today as a series of "1"s and "2"s. That would imply Monday its gonna break it off in shorts early in subwave 3 type move up opening. As per EW rules, it probably counts best the way he has it because wave 3 can never be the shortest wave. But his count supposes we are on the last wave push up of Minute [v]. We may not be.

If you look at the subwaves and see the way the indexes diverged a bit between where they bottomed today and also the fact that the NASDAQ didn't make a recovery high today, it smacks of a potential (b) wave up move in a larger [a] wave flat.

The squiggles supports that thesis as there are several valid ways to construct double zigzags which means the move up from low today was corrective in nature. There may be some more upside Monday (I have this 1 minute labeled that way, or there is an equally valid way to make today as the top of a (b) wave rally (see my note on my 1 minute chart and all my ALTs and then use your EW skills to see what I'm sayin.)

So what if Thursday's high was the orthodox peak of Minor Wave A? That means the market is already in correction mode. The Minor blue B wave will of course consist of a three wave count, Minute [a], Minute [b] and Minute [c]. I have also suggested that due to the extreme bullish nature of the price action and support levels, the Minor B wave may not retrace as much as permabears would like and may take a "sideways' bias correction. Think of the 3 week mid April correction in which price traced generally sideways.

An [a] wave flat or expanded flat would be a perfect way to start a B wave sideways correction (relatively speaking). The low of this [a] wave would hold 950-959 area support likely. Then some kind of [b] wave structure would trace out and then the Minute [c] wave. Thats the theory anyways and a Minor B could take well over a week or two or more depending on how complex it traces and how much bullishness needs to bleed off.

Why might a B wave not retrace in a big bear move? Lots of reasons: 1) there are still buyers chasing the rally during the correction 2) Sellers have lost their fear 3) Technical support levels. 950 was huge resistance and now it just became huge support. Yet it should be tested. 4) Trapped shorts want out in a bad way. They are looking for an out. They'll likely settle on 950 area and take it gladly, particulalry if they doubled down or tripled down.

Anyways I threw this out there because I cannot get a good read on the squiggles today. They look like ZZ's up which means correction up. If the market opens in a bullish move gap up Monday, Kenny's count would possibly be the one. The thing about these counts is that e-minis always give key clues. So by Sunday late night, we'll probably guess the answer on exactly whats happening anyway.

Technicals are weak for Friday. Negative divergences all around. So it smells like ZZ's and a (b) wave rally which means its almost over if not already. Tick 10 day average is way high.

But P2 is all about upside surprise and setting rally records (at least recent records) and it seems to be doing that in spades. So be nimble! Everyone is guessing 1000 is gonna be hit Monday/Tuesday and right about now is when they yank it the other way a bit.

Elliott Wave Update ~ 24 July

Minor "A" wave looks complete or pretty darn close. In Minute [v] subwave pink (v) almost equals pink (i) at 982.56.

Then entire move up is very countable. All the subwaves work pretty decent. The channeling works very well. It appears 980 is resistance.

A nice down draft come Monday would work well and a break of the up channel line signals B wave is in play.

Thursday, July 23, 2009

A Comparison to the Last Wave 2 Rally


I like to compare things to past precedents. I do this sometimes just to see if things that I project to happen could have happened in the past. Its useful analysis at times.

The last wave 2 rally of significance was of course the Spring 2008 rally Intermediate wave (2). Looking at that rally closer I realize the current rally has some recent moves that look eerily similar to the 2008 rally. All my notes are on the chart.

Bullish Sentiment Update

Bullishness is still diverging. I found a small example on the last wave 2 rally of significance, the Intermediate (2) in Spring 2008. Its instructive I think.

The continued divergence, portends even higher prices to come (eventually). The market is due of course for some kind of consolidation first. A consolidation move (the B wave pullback I am looking for) would have the effect of also consolidating bullishness as long as prices maintain support levels more or less. What levels? I suppose 950 was a key resistance battleground area so the market will attempt to maintain this major level.

I used to think a dip to the 930 - 934 support area would occur (and it still of course may - its certainly not out of the question) but now since the market ranged high above 950, I think they aim to basically keep the price retrace extreme above or near 950 support. What was major resistance, becomes major support. So more consolidation at or above 950 would allow the final run to 1000 and above in a final C wave move.

If it dips lower than 950, it might be quick. There are a lot of shorts I imagine still trapped and/or doubled or even tripled down and getting nervous.

Anyways that's my current thoughts at the moment.

Elliott Wave Update ~ 23 July



Well upside surprise indeed! I think, in the big scheme of things, that the market was tracing triangle (ascending on the SPX cash index and e-minis-all hours) waves for Minute [iv] these past few days. Regardless, the market thrust out and finally broke that 950-area monkey. Thrust moves sometimes do not produce a big fat, easy-to-count-5 wave structures. Sometimes its just that - a thrust. If the triangle was about 20 points wide and you add that to the upper line, you get a target of about 979 which is what it hit today.

There is a an awful lot of "skipped space" between 959 and 972 that really hadn't been traded in and I suspect it will very soon. So a 959 backtest, at the least, seems in the cards and probably soon.

But regardless, I provided 3 charts at various time levels. I have labeled it in the best count I could and won't try and outguess the structure (via a thrust move). It would seem Minute [v] is playing out and it *should*, in theory, have one more small recovery wave up left to trace. But anytime a thust move occurs out of a triangle, sometimes thats all you get is a thrust move.

Technically, the daily tick is very high and yes, there still exists negative divergence on the hourly chart confirmed by MACD.

Wednesday, July 22, 2009

Elliott Wave Update ~ 22 July


Probably an ending diagonal in play for Minute [v] that either topped out at 959 or will tomorrow in the 960's. Either way, the waves are choppy zigzags and have lost their pure impulsive look.

I'll be looking for a minor blue B wave retrace soon. To what level we can look at Fib markers and the 38% spot is a good guess that lies in the mid-920 range. 927-934 is a strong support range and thats the general area I am looking at first for a B wave price retrace. Once the waves keep playing out, we'll know more of course.

The last time I was in this positon with the market topping out in the 950's in June, I was looking also for a B wave retrace and a C wave rally toward the high 900's. It didn't pan out. So I won't presume that I must absolutely be correct this time either.

However there is no doubt that this rally leg is so much stronger than the "C" wave rally leg that topped at 956 in June. So I am not looking for a collapse from here as some are. In June I should have been looking at technicals to see an (X) wave pullback coming. I was looking at sentiment. However this time, I think sentiment is the correct primary focus and wave structure. That and good 'ol support and resistance lines.

We'll see! Summer marches on.

Tiny Falling Wedge Alert

Possibility it already peaked. We'll know soon.

Update: Long Term Apple


and I left my markings on them to see how it would play it. Here is an updated Apple chart. Weird how it follows my lines sort of. Apple gapped up today. A hard pullback and it might form an island top for a bit or an evening star.
Also I think I screwed up the subwave labelings for the long term Apple. I think I should have had them labeled as cycle waves up not primary.

Minute [iv] Triangle Squiggles (Updated 1:31 EST)




There is now stronger evidence that some kind of triangle for Minute [iv] is tracing out. A break below where I have pink (c) indicates something else is going on.

A break above the previous high of 956 where I have pink (b) likely indicates that Minute [v] is heading toward its peak.

Triangles can take time and labeling them early often occurs. Just look at the subwave patterns. The subwaves usually are zigzags or some complex variation of.

E-minis


You can see wave [iv] running triangle possibly tracing out on this chart. I'll be watching that lower channel line.

Tuesday, July 21, 2009

EWI and Other Ramblings

I'd like to clear up any possible confusion when it comes to EWI. EWI is of course, Elliott Wave International, which was founded by Robert Prechter, who of course was a key co-author of the "definitive bible" on Elliott Wave theory in his published book "Elliott Wave Principle: Key to Market Behavior" (the only book you'll ever need on EW theory by the way) first published I believe in 1978 with Robert Frost.

First I'd like to say that I pay for EWI's services of "Short Term Update" which is a daily-type market waveform update posted by Steve Hochberg three times a week (Mon, Wed, Fri). I also subscribe to their monthly newsletters "Financial Forecast" and "Elliott Wave Theorist", the last of which has been written by Prechter himself for over 25 years. I have subscribed to all three only since August 2008.

The Short Term Update doesn't typically post "squiggle charts" like I do and others. I suspect he has no time as he tracks the DOW, SPX and NASDAQ along with the dollar, euro, gold, silver and bonds. So in that respect, I have an advantage in tracking just generally the SPX, yet bond traders wouldn't like my site so much because I only talk about them in general matters (debt problem). Me and Kenny sometimes get on Hochberg's case in offhand references, but regardless, I find myself always eagerly awaiting what his M,W,F updates have to bring to the EW table. This enthusiasm hasn't waned.

The other two newsletters I sometimes consider I could do without. Yet somehow every month each letter brings something new to the table and keeps it fresh. Its like going out and playing a round of golf. You may be a "weekend golfer" but you always hit that one "sweet shot" that brings you back for more. Those newsletters have that knack. And then every 2nd, 3rd or 4th one, they really rock. So regardless, I keep subscribing and cannot imagining canceling. And keep learning the theory. It has been a journey. I still await every newsletter with eagerness as my enthusiasm hasn't waned for these either.

Robert Prechter I think is an outright genius. His work in the field of EW theory and then practically founding the science of "socionomics" is truly groundbreaking and has yet to be truly appreciated. Some of you know that I have stated in the past that I feel Elliott Wave Theory has truly changed my life's outlook and I consider it one of the most profound theoretical discoveries in the history of mankind. The fact that it isn't yet taught in any school is not surprising though, at this time it would go against government groupthink and "buy and hold" strategy. Such is human nature.

This is when of course the EW long-timers say, "Well Prechter has blown it more often than not and completely misjudged the power of the Cycle Wave V and the subsequent rally from 2003-2007, so I am hardly convinced." Fair enough. I am well aware of the history even if I wasn't trading it at the time (I got into EW theory and the stock market in general only last summer 2008)

So how do I respond? Well first and foremost, I take it as a completely contrarian position in that I generally adhere to Prechter's wave forecast as being the likely true path forward over the next few years. He has, since 2007, been pretty damn good. He recommended going short at 1550 SPX in the summer of 2007 with full leverage I might add, and recommended covering at 750 in Feb 2009 for a full 800 point gain in e-mini contracts. At the time he recommended covering shorts, he added that the market was likely going to bottom in the 600's but he wasn't going to chase the last points. Classy.

So in general, my response to the "Prechter Factor" is that if you are convinced he is wrong now (5 Primary waves to a very low DOW of under 1000), then I say I will take the contrarian position and say he is right at least for the next few years to market bottom. Doesn't it make sense that someone finally "discredited" has his greatest run exactly when he is discredited the most? I think that in itself fits EW theory general principles! Robert is, after all, a permabear (as I)/ I understand his long-time positions.

So why do I have all the Elliott Wave International ads to the left? Well I am an official "affiliate" meaning they allow me to sell their services for a cut in return but only if you sign up through my links, usually as a free "Club EWI" member first. I eagerly do this because I am a true believer in EW theory, and not just trying to make a quick Fib buck on a market bounce (although there is certainly nothing wrong with that!)

EWI has a free service called "Club EWI" membership. You get some free stuff with joining through clicking on the EWI ads I run to the left. If you become a club EWI member by clicking on my ad and signing up to "Club EWI", and then join a service (even if months later), I get a small commission for luring you to their services depending on what you buy. Hey it helps pay the bills! (And believe me, me and my family got caught up in the credit-induced cycle b wave rally from 2003 -2007! - I have half of China in my basement to prove it!)

Why would I hawk EWI services when it seems I am in "competition" with EWI directly? Well for one thing I have learned there seems to be many interpretations of Elliott Wave theory going around. Some I consider downright heretical even though I rarely comment on that. I rather do my own work and let it stand or fall on its own merits. After all, you can scroll back to previous posts in the beginning of March and check my work and see how it has turned out. Spot on? Heck no, but in general, not too shabby. I have seen a lot of sites seemingly make up their own theory and I rather steer people to EWI's (Prechter's) thinking first and foremost. Its where I am aligned. Its a synergistic relationship first and foremost.

So yes, I am in "alignment" with EWI's overall count which is of course a Prechter count. I believe 2000 was the true bull Grand Supercycle Wave III top (of over 200 years which perfectly aligns with the rise of America I might add) and treating it as such I go from there. I will say I do not steal EWI"s work nor duplicate their specialty-type data that they provide and when I occasionally offhand reference something mundane that may be perceived as EWI's work (even if it was my thinking too by chance), I give them full credit. I will say that sometimes that there are coincidences in data that I produce and then EWI produces the same night or vice versa. Sometimes I wonder who is reading who! But it always makes me feel good that I have learned enough to spot the key elements on my own and translate that into something useful.

As an example sometimes EWI provides sentiment data in conjunction with certain charts. I do the same type things, yet I use different data service - i.e. - $BPSPX versus whatever similar service they use. Occasionally, when warranted, me and Kenny will reference an extreme data reference from EWI that they mention due to its significance and that we may (or may not) agree with the interpretation at the time. And we'll give credit.

EWI's specialty services provide highly specialized charts and data that I never would duplicate because it would be wrong (and against policy I might add) to do that.

Could I do well without EWI services from here on? I have no doubt I could. But I think I would feel naked nonetheless. Afterall, they bring an awful lot of resources to bear on EW theory and I am only a mind of one. I think, in general, that EW theory is a simple theory: market moves based on where we are in the overall space-time continuum! (HEHE - now I sound radical!) But I rather think EW theory is a collaborative effort. And having an EWI membership only enhances my own abilities over the long run and they always extract such unique data from fresh perspectives that I neither have the time nor resources to duplicate or contemplate. Like I said, that Prechter guy is a genius.

So it is no surprise that certainly more than a few my blog readers (and Kenny's) actually subscribe to EWI with enthusiasm, yet read our blogs with (we hope) equal enthusiasm. It suggests that there is always room for debate and interpretations and alternate counts.

Which brings me to my "novice" comments on a post a few days ago. Anyone who takes up EW theory is not a "novice" and I was silly for stating things that way. Each's effort is always appreciated. There is no ultimate judge, only time will truly tell. I almost always look at charts posted to this blog even if I don't respond to every one. I consider all possibilities yet in the end of course I have my own opinion. So I certainly didn't mean that "novice" comment in a negative way. I only meant it in the fashion that I remember going through when I first plotted "1,2,3,4,5," on a chart and called my first Elliott Wave. My enthusiasm was great and yet I got a lot of things wrong. But anyone who takes that first step in earnest to plotting his/her first wave is no longer a novice. They are merely on a journey that truly no one knows where it will head, even Elliott himself.

So in the end, EWI is my guiding light. Yet I feel I bring enough freshness to the table to make it exciting. for instance, who was it that argued a common sense stance that a third zigzag start point in a triple zigzag formation shouldn't start from a lower spot than the actual second ZZ start point? That was pure me. EWI didn't even think of that and they got the recent 869 low spot wrong (they were too bearish) as many others did also (the H&S formation). So from here on out, even if the market collapses in a heap of a mess of a P3 wave, I can smile knowing that I had some "chutzpah" in calling the 869 low a likely second (X) wave low based on sound EW principles that was original thinking!

So I may still be wrong, but yeah, market made new highs and I'd have to say I was more right than wrong no matter what happens from here. So that's why you read blogs like mine yet also love services such as EWI.

So what is the bottom line of my ramblings?
A) I never duplicate EWI's services. Sometimes we have coincidences. (and I am often first!)
B) Prechter is a genius.
C) EW theory is a "synergistic" effort. Thats whay I love Kenny's work too and anyone else I have linked. Thats why I hawk EWI's services.
D) I use EWI's services which shows deeper (or unique) data then I could ever care to translate (or am allowed to). I use this data to help shape and keep my larger waveform patterns "aligned" and support larger arguments. Like me suggesting there is low liklihood of an expanded [B] wave flat or (4) of P1 flat. Deeper EWI data supports my view (and I really cannot duplicate their data point for point although the basics of the theory is just that - basics)
E) I bring enough "uniqueness" to the table to warrant my own blog I hope! (afterall I still have a full time day job!) Particularly in my daily projections (which EWI doesn't get into squiggles too much)
F) EW theory is a journey - there are no novices. Perhaps less-trained or less experienced. After all, counting to 5 is not exactly rocket science!
G) If you thinking of using some of EWI's services, join "Club EWI" (free - and provides some free services) through one of my pimp links to the left and then once your registered, any service you decide to use, I get a small cut. (Even if you don't join thru one my links, I recommend you checking them out!)

Anyways, once you learn the basics, counting to 5 and correcting in 3 and making larger structures out of smaller ones is fairly straightforward. I hope to be doing this a long time. I hope never to get dogmatic or stubborn. Heck the market never lies.

Elliott Wave Update ~ 21 July

Some beautiful channeling on this chart. I think the key thing is that a break of the channel lines is an indication that Minor B is underway. The whole A move up reminds of of how the A wave off the 666 bottom topped out in the lower half of the 800 range. Lots of last minute fits of bullishness before a proper B wave price low finally kicked in. And the B wave low (I think 779 at the time) was a quick one that bounced pretty quick.

Same thing going on here? Perhaps. The equivalent is one quick trip down to the lower 930's or upper 920's for a B wave price low. But I am getting ahead of things again. I don't think this A wave from the 869 low has even topped out just yet. But its getting close.

As far as price action, it would seem the bulls want to top this Minor A wave out as high as they can so that any potential severe pullback holds the 927 -934 zone as a B wave pullback price low. Anyways, thats my gut feeling on how the price action is occurring. It just "feels" like a pullback that breaks under key support at 930 area will somewhat damage the rally's chances of making it to 1000 or much higher (which may be the true target - the 1014 38% Fib mark). For instance a drop back to the 915 area would seem awfully damaging. Anyways, I don't have a crystal ball for any pullback price low, I am actually keeping all possibilities open and trying to stay in tune with this rally overall.

Monday, July 20, 2009

$BPSPX Update

A nice upwards trendline I noticed on the $BPSPX chart. If hit, it will challenge nicely the 2007 extremes which make sense for a P2 rally.
Again, one thing about this chart: It takes price movements to move the bullishness. The significant rally price peaks almost always match the peaks in bullishness. I don't suspect P2 should be any different. Daily percent is back to 59. But if my cool trendline is hit late summer, expect readings in the 80's.
If this thing behaves in a different way than I expect from here on out, I'll be the first to post and say so.

Squiggles


I hesistate to chart squiggles because there are lots of interpretations of today's moves. But hey thats what I do.

So I approached the intraday count from the perspective of what I mentioned on my update tonight: the fact that there is no discernable Minute [iv] as viewed on the bigger charts like hourly chart. Now there is no hard "rule" that says this has to be, however it would "look" better. And in EW counts, sometimes (actually often) what "looks" best makes the best interpretation. So what would look best? Some kind of Minute [iv] pullback toward the 930's.

So today I have labeled as an a-b-c (or w-x-y) rally to a Minute wave [iv] (b) wave peak. That would imply after topping early tomorrow (unless today was the top) expect a bearish (c) wave to push under 940, likely back toward 935 support thereby forming a Minute wave [iv] expanded flat.

Its just one possibility to get a "visible" wave [iv] that stands out and you say "hey thats wave [iv]....

Elliott Wave Update ~ 20 July








Bulls got their close above 950 and NADSAQ above 1900, so indeed I think that is a strong signal out to the Stock Market world. I could easily say the market will soon (if it hasn't already) peak in an A wave, get a B wave pullback and then the rally toward 1000 will commence to complete a triple zigzag from the 666 low and just leave it at that. Thats the basic gist of where I am coming from.

But what the heck lets just see where A wave might top out at. Kenny put up a nice intraday chart and mentions he didn't see a Minute [iv]. I tend to agree that looking at the wave structure from an hourly chart, you really don't see anything that stands out.

I re-drew the subwaves a bit on my 5 minute chart. Its a tough call on where the A wave will top out, I don't think it knows just yet! But either we are in the midst of a Minute wave [v] to peak or a bullish (b) wave in some kind of (a)(b)(c) move for Minute [iv].

I'll take a stab at the 1 minute squiggles and post later on some of the better current count options.

Regardless of exactly where the wave structure is at [either still in Minute iv or the later stages of [v]), we have to look at pullback spots. The nearest strong support area is 927-934. I think that is a key level to look at for at least 1 pullback maybe 2 over time.

This is the bulls charge to a summer P2 rally peak and if they do not hold the 927 marker, it kind of damages all the work they accomplished in such a short time. At least thats how it feels. Suddenly a trip back to 914 seems damaging in the effort to make 1000 (if thats where we are headed). I dunno, I'm just rambling thoughts out now...

Good luck all!

Saturday, July 18, 2009

Bulls Need a Close above 950


As I stated in other recent posts, I will be watching bullishness every day (as I have been). I am in EWI's camp that think this is a Primary Wave 2 up rally and that the rally should, in theory, peak in extreme bullishness. The only real decent indicator I have for that is what Stockcharts.com provides in the way of Bullish Percent S & P 500, or the symbol $BPSPX.

Bullishness % had a double top peak at the 956 high and corrected some 47%. Of course the rally this past week has reversed this chart somewhat. It is now heading back up. However the market is near its top yet the bullishness is far from its previous rally high. That is an eye-catcher.

All 3 main indexes rallied 7% this past week. 2 of those days were strong up days indicating a near-term trend change in my opinion. The market closed above major support for 4 days in a row near 878 and finally buyers seen the price action and jumped in figuring this was going to be the best pullback they can get.

EW theory is all about sentiment. I do like chart patterns and TA and such, but from here on out, P2 should produce a peak in bullishness. So I will be showing the daily SPX chart more often with the $BPSPX superimposed as an indicator. The bottom line is I look for a new extreme in bullishness to help identify a new top.

Its an earnings run season it seems. Only 1 week old, there certainly appears to be enthusiasm for it. For those readers who believe GS controls the world, summer low volume is perfect for them to pump it up one more time and hand it all off to the stupid Joe Q. Public, who, after a correction in fear of nearly 9 months (remember VIX hit extreme in Oct 2008) may finally be warming back up to jump in the stock market again. They don't want to miss the rally and CNBC is pumping it every chance they get.... Hey that's the way it works!

The market is due for either a Minute wave [ii] pullback or a Minor B wave pullback of course. How low it will go is any one's guess and depends on the fear factor (VIX) bounce and total sellers. The 50DMA of the SPX might be a good bounce spot. It may be a quick one too. Why quick? Because I suspect there is a ton of short sellers looking to get the hell out of their positions with minimal losses or if they are lucky, break-even. The 7% up draft caught a heck of lot off guard probably. But buyer beware, I am just making an educated guess.

The thing about this chart I posted is that there is plenty of room for bullishness to climb. And it usually only climbs with a price climb. In fact bullishness on this chart is still quite low compared to the 956 top. That to me does not indicate weakness but rather a significant correction in bullishness has occurred which will now allow prices to finally close above 950 SPX. Once they close above 950, it should clear the way for a run to 1000 perhaps more. Resistance lines support that thesis.

My second chart shows that 950 is the marker the bulls need to beat. They need a close above it which hasn't happened in a very long time. Once 950 is taken, it really is a free run to near 1000. Sure there will be speedbumps, but make no mistake, 1000 is the next MAJOR hump. First we had 750, then we had 820. Then 875, then 950. Those were major layers the market had to eat through roughly. I may be off some, I am just trying to recall some battlegrounds.

So I really don't see a total market collapse from here just yet. Why would it? If everyone was expecting a B wave pullback, and the market corrected some 30% and some 87 points, why must it go lower than 869? If it does I would consider P2 may be over if it was to head under 850.

A 7% up week big fat white reversal candle is nothing to sneeze at. A correction would seem in order, but the market sure seems to want to get on with rallying and a close above 950 SPX.

But its also about the DOW. And 9000 is a nice number.

Friday, July 17, 2009

Come Back Kenny (Updated)

P1 is probably the most perfect 5 wave Elliott structure of Intermediate size you'll ever see. It fits the theory completely not just in chart patterns but subwave internal technicals like breadth, volume, fear, divergence between (3) and (5)... etc.). To call this anything else than what it is beyond fathom to me.

Elliott waves always produces connecting patterns that fool the novice (and K is no novice). An Intermediate wave (4) flat? (EDIT: to be clear - Kenny doesn't see the (4) of P1 expanded flat but the possibility of a Primary [B] wave expanded flat - yet this post is also for all those who insist its (4) of P1. The main point of the chart is to show the P1 channel lines and in particular, the (4) triangle. So that still argues against the P[B] flat.)

Lets put it this way: No matter what happens from here, I would never call it a wave (4) of P1 flat. Highly unlikely. Nor a [B] wave flat for the same reasons. Backup count to the backup count? Maybe. But never the primary.

If your a member of EWI, you know what I am talking about and all the internal subwave technicals that were provided and sentiment charts, etc fit the theory perfectly.

EW theory is more than just imaginative chart patterns. That's where the novices go awry. They see ABC but don't pay attention to the nuts and bolts of true EW theory which is the heart of the matter.

P2 affected my brain in April when I insisted the market would get its 38% correction.
http://danericselliottwaves.blogspot.com/2009/04/market-is-goin-down.html

I of course had some SDS shoved up my ass. I made peace with p2 shortly after. Mostly I have tried to stay in tune (besides the early call for high 900's - but hey, I think I may get my target)and stay nimble an stay focused on the theory and not what I want it to happen.

Kenny come back to the dark side of tracking nasty Primary waves down. The BIG one is coming The expanded flat looks nice on a chart maybe, but lift up its skirt and you see it ain't all that. The internals don't match and I think you know it deep down maybe you forgot all the cool internal data EWI provides. Kenny, your certainly no novice. I have learned most of my T/A from you.

We can keep it as a backup count. That'll work for me. Just say that P2 has affected your thinking. It did mine. It affects all. That is the power of P2. I made peace with it.

Refining a P2 target



Based on trendlines and waveforms, I plotted a presumptuous P2 target and date.

Back in June I theorized P2 would continue to a new rally peak in a double zigzag and bullish sentiment would reach an ultimate extreme. I just figured P2's window was extremely limited. http://3.bp.blogspot.com/_TwUS3GyHKsQ/Si1urtzdcLI/AAAAAAAAA0s/CIwrzObisS8/s1600-h/60.png

I was wrong and it was too much to expect P2 to have ended so soon when P1 lasted some 17 months. I think I just wanted to be different and push the envelope. In the end, it was too much arguing a moot point for something that didn't materialize. I learned much from that. It's OK to go against the grain with your counts, but you better be right. I of course quickly switched to the backup alternate count and switched my Intermediate wave locations and went with a second (X) wave pullback.

I then theorized on many occasions and using logic, that if the market couldn't achieve a price high in a double zizgag it would then make a triple zigzag to reach a proper peak and also to satisfy time requirements. My 1930 rally chart seems to support that theme of a triple zigzag.


I also theorized that if a triple zigzag was to occur, then the start point of the third and final zigzag should NOT start at a lower spot then where the second zigzag started. So I called 869 the bottom of a second (X) wave on the day it happened http://2.bp.blogspot.com/_TwUS3GyHKsQ/SlU6pYzd85I/AAAAAAAABDM/CH1UJOLrEYw/s1600-h/spx.png

I was, I admit, doubtful, but largely stuck to my guns. After all, I was going against most technicians and even EWI and ignoring the H&S. However I was closely tracking sentiment and it looked like a good turning point was near.


So then a rally. And boy it was big. 2 strong up days of 90% (I am not confirmed that the first was 90%). And that usually marks a trend change.

So it would seem a triple ZZ is looking good for the count to p2 peak. Bullish sentiment has just started to correct. P2 should peak at a new high of bullish sentiment. That is basic EW theory not just my judgement or opinion. My $BPSPX chart shows that there is plenty of room to run up. And if a near term B wave correction comes, then that should halt the upward shot momentarily.

The Great-Great Bear trendline I show in this chart may mark the top of any rally.


I may not have it at the precise spot, only the market knows that. However a break over the smaller trendline has occurred in my opinion. That means the market is free to run to the next trendline which is really a Fib fan line.

Now lets see how Monday cooperates with all these fancy projections. I certainly have backup counts and there is a lot of bearish talk of a huge collapse next week due to post -OPEX. I don't possess a crystal ball afterall.
But hopefully this post gives a general overview and ties together what I have been tracking and talking about for a month or more and explains my previous posts and assumptions. I know I tend to shotgun a lot of stuff.