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Wednesday, September 30, 2009

Elliott Wave Update ~ 30 September


Since the 1080 high, we had a goofy 5 wave (?) down to 1041 low. But even that is open to interpretation. We then had a 5 wave structure up to 1069. It could be a 'c' wave in an expanded wave (ii) flat. But since 1069 we have what is arguably best counts as zigzags intraday today. Zigzag down, zigzag up and then back to the late afternoon low.

So the waves triangulated today which suggests there is more upside coming tomorrow but only if it follows through. And the targeted upside would be between 1069 and 1080.

The other side of the equation is downside and potentially big wave (iii) downside of course. The DOW violated its Minute [i] price range.

I suppose everyone and his brother is expecting a massive sell off tomorrow. And you know when everyone has already taken their positons in the "expected" move, then the market sometimes does the opposite. So in that respect you have to respect the triangle potential. 1041 is a key support marker.

I will say this about the price action: It reminds me of the sub 750 range where prices fought going down and had several 20 points spikes. This was a sign that selling pressure was easing and bulls starting to exert control.

So the flipside is that the nasty little selloffs are signs that the "dip buyers" are fewer and farther between and eventually sellers will take over just as buyers took over sub700.

So even if the market makes a move up tomorrow, its going to come down soon enough in my opinion. Doesn't the market like to leave you hanging at the edge every single day? See it ride and hold that trendline magically?

E-minis


Today is Fibonacci 144 of P2. Think exhaustion gap. Think distribution. Think in valid wave structures.

Good luck today!

Tuesday, September 29, 2009

The Irony of Wave Pyschology



The irony I find is that people who are part time wave followers will give up following waves just when they yield the greatest patterns. And precisely when do these patterns yield the greatest interpretations? When they are almost complete of course!

Counter trends can be tough to count. But as they mature the options whittle themselves down. P2 is no different. It is counter trend to the primary trend which is down. Look at my weekly SPX chart and what do you see? You see impulse waves down from 2007 and a 3 wave structure back up. Yes its sharp (it was predicted to be) but who can deny that it makes a beautiful "ABC" look on the weekly? And yes when we break it down on a subwave 60 minute chart we come up with slightly different subwave count but regardless when the weekly is painting an "ABC" look, we take it for what it is - counter trend to the big bear market - and the greatest counter trend we'll have from here on out.

I hear a lot of "When Dan stops calling P2 tops is when we'll turn!" LOL! That's not the way it works! I suggested that 1039 may be a P2 top because it was a valid wave pattern. It didn't "look" great because the C wave was too short versus the A wave, but at the time technicals supported a down move of some significance. It didn't pan out.

When last Friday's 1080 top came in in what can be argued was an ending diagonal pattern, then you have to consider the possibility. What is the possibility now? That 1041 was Minute [iv] wave low. But yet many are now tired of waves just when the pattern is maturing the greatest.

Could we bust above 1080? Sure! Could we find a sweet spot between 1069 and 1080 as I suggested is a possibility on tonight's update? Sure! Could it all indeed be over at 1080? Sure! But regardless the more waves we trace (up or down), the higher the probability interpretation.

Its also completely ironic that everyone is singing the tunes of the market above 1000 SPX. You hear it constantly now. And people completely convince themselves "they knew it all along" and blabber about such and such a target based on some such and such technical or some such and such trendline. Its Ok though. Its understandable and in the end good for you! I hope you played it just the way you predicted many moons ago.

(Please - this is no cut to regular posters or readers or fellow bloggers who DID imagine what markets can and do do all the time. And even to those that cannot imagine what it did that is fine too! I myself am still very much humbled by the market and in awe of it all)

On the 1st of March I posted quite seriously on the Yahoo SKF board about DOW 10000 by end of August (didn't quite make it yet) and all I got was derision. But that was very understandable.
http://messages.finance.yahoo.com/Business_%26_Finance/Investments/Stocks_(A_to_Z)/Stocks_U/threadview?bn=58157&tid=330489&mid=330489 Now some cannot fathom 666 or lower again. That's a good sign we are near the top. Again, we must be patient. This is a historic rally and I am in awe of it all. The great irony is the more it goes up, the more I am convinced the overall count is correct!

Sniping at EW theory is on the upswing by part-time followers. Its understandable. Mostly bears read the bear blogs. What waves have done is shown you the probable alternates and allowed each and every one to make up your own mind. And most of you have and that is a great credit. That's all we can hope for is that you understand enough about the theory and be able to make your own judgments.

And there are a lot of great wave readers that comment on this blog. They too are showing the way(s).

But looking back the count hasn't changed. This is still P2. This is still Minor C up. We are either in Minute [v] up to a final peak or we peaked at 1080. Either way, those are great to know. And if the market makes a new high above 1080, its just a matter of subwave squiggle interpretation. After all Minute [v]'s don't last forever!

So when will I stop trying to properly interpret a P2 top? When I get it right! For anyone to even make that statement doesn't understand waves at all. For the more the waves trace, the higher the probability interpretation.

Even if there is another major structure up to 1250 (after an Intermediate sized pullback), I'll be interpreting based on all the evidence I can gather. So I won't stop. So in that respect (looking for P2 peak) you could say this bear won't be broken. But only because the primary trend not only points down but points down to a drop to unfathomable levels. http://4.bp.blogspot.com/_TwUS3GyHKsQ/Sr1Inx4RFgI/AAAAAAAAB_o/swCTr02ZOcA/s1600-h/2009-09-25-PROPHET1.png

The waves give you really good entry/exit/stop points. Many here are daytraders and I can respect that. But a few daytraders tend to have that "10 minute window thinking" and cannot fathom other methods or see beyond the next support /resistance level sometimes. Sometimes that's where the greatest criticism comes from. Well that's too bad. Tell that to my bulky (as in unwieldy) 401K which is limited to 12 trades a year in nothing but 15 choices of bullish mutual funds LOL!

But regardless this is not a 10 minute trading blog although I do like to do squiggle counts. Its an Elliott Wave blog. And the larger count is P2 top. I am having fun counting and so should you.

Robert Prechter gets bashed a lot. And he is not in the mainstream as much as you'd think. In fact he has been thought of as "discredited" by most in the media and non-media. I take that as contrarian.

I take the contrarian position that Prechter will be most correct now that a lot of people have shunned his views. And yes he has regained that following a bit, but he is still not taken seriously in the mainstream too much. And even after he had smartly charted the entire 1576 - 666 drop, he still hasn't gotten proper credit except among a few bear blogs.

So we have a LONG way to disprove the P2/P3 theory. But near the top of P2 when it is still tracing out excellent patterns to a top is not the time to abandon the P2 camp if you been in it for the majority! Its the exact time to jump on board. But please, due diligence and make your own minds up...and that I know you do.

Just be aware of the psychology.

And for the NASDAQ chart I shown, do I know it will happen or even have it as my primary count? Well it doesn't matter what I "think", it matters what the wave pattern potentials show. And as long as the potential possibly projects to the levels I have it (not certain about time) in a valid structure, I have the responsibility to have it as an alternate count. The fact the there was an exact 1.614 expansion ratio is a little scary....

Regardless we would be "mentally prepared" for the alternate pattern to play out and at a psychological level we could sift through the bullshit and keep from losing money (or make money playing the pattern to the upside with smart stops)

More importantly cannot you see that if the NASDAQ traced exactly a 5 wave substructure to 2215 that it would actually be the most valid top pattern to date? Just when the pattern traced a perfect 5 wave structure of significant size and duration, a part time waver would be "done" with wave theory for good. That's just the psychology of waves. But more importantly, thats the psychology of the market in general.

By the way, the NASDAQ count to 2215 is not my primary count. But I do have to respect the Fibonacci and EW pattern potential. It is a valid alternate of course. And if the NASDAQ does make a new top, I suppose it may be close enough to 2200 anyways.

Elliott Wave Update ~ 29 September


Should be a key day tomorrow. Tomorrow is the 144th Fibonacci trading day since the 666 low in March. Since most readers are familiar with the overall counts no need to rehash things too much but i'll review things a bit.

Today was a confirmation of a 5 wave move up from 1041 Friday low. (By the way I do not like it as a "c" wave of an expanded flat because the "a" wave would have been very tiny.

So there are 3 basic options:

1) Today's 1069 peak was Minuette (i) of Minute [v] of Minor C to P2 peak. High will occur above 1080.

2) Today's 1069 peak was a Minuette (ii) top. The subwave count would have it as an expanded flat peak .That implies P2 topped at 1080 and also implies a wave (iii) big downside tomorrow.

3) Today's peak was an "a" wave or (a) wave of a deep 5-3-5 zigzag Minuette (ii) back towards an attempt to take out 1080 top. This implies that it will fall short of 1080 and makes a high somewhere between 1069 (today's top) and 1080. It also implies a huge reversal to the downside somewhere between 1069 and 1080.

The stakes for tomorrow is the monthly closeout numbers.

As Kenny recently mentioned, a close above the 20 month MA is bullish. That mark is 1067.07

So I think option 3) above is about where I stand in my primary thinking. Maybe 1 or 2 indexes makes a new high and others don't. That would be typical.

So the direction tomorrow and breadth numbers and VIX will all be telling signs.

Bears will want a close under 1067.


Monday, September 28, 2009

Elliott Wave Update ~ 28 September





Well you all know the primary and alternate counts. Either P2 topped at 1080 or this is now the proper Minute [v] in progress to a new, as yet to be determined, P2 high.

Here are the pros/cons for both:

Pros that P2 has not topped yet:
1) Volume ratio was very good today. Which implies follow through to the upside.
2) Bulls closed it above 1060
3) Tech is still showing strength so risk appetite is still high. JUNK made a new high.
4) End of quarter. They are still bullish (and buying the dips)
5) Micro squiggle waves from Friday 1041 low favor a bullish count to be honest. But it needs to break higher tomorrow to confirm.

Cons (P2 has topped argument):
1) Low volume, probably due to Jewish holiday, resulted in cats away, mice will play.
2) The high today stopped at 61.8 Fib, a normal wave 2 spot.
3) Transports were sick looking dead cat bounce
4) Oil was dead cat bounce
5) Dollar higher today
6) gold lower
7) VIX 20/50 DMA bullish crossover has been a teaser for many trading days and its close to crossing with a hard bear chop.
8) VIX only retraced back down 38% while the market traced back up 62%. Perhaps divergence.
9) Waves are still only in a 3 count up since the 1041 low.
10) A/H's E-minis overlapped [i] and [iv].
11) RIMM couldn't catch a bid still.
12) The MM's didn't even make a head-fake move to close the gap up today.

Of course many or a lot of those things I mention in the cons side of things could very well shake out better for the bulls tomorrow or maybe they just don't matter. Its just what I see as of now.

The market was due for a bounce today. I called for a gap up and a run to 1060 but there wasn't a hard reversal yet so - tomorrow is another key day. And up volume ratio was much better than I thought it could be. So yes this bear has some doubts.

I still have P2 as having topped at 1080 but at least if the alternate plays out to a new high, that should give us a nice entry on a lot of things. There should be a triple negative RSI daily divergence if a new high plays out in next few days. That would align nicely with a P2 top.

Anyways feel free to add your own observations about what and why and where we are headed. We'll know tomorrow.

Sunday, September 27, 2009

E-minis

Still in a down channel but some positive divergence going on for the time being.

A 5 wave move has occurred down.

The e-minis broke under Minute [i] peak by quite a few points (not shown on chart).

Good Luck!

The Conventional Wisdom

Another Sunday rant to followup somewhat to my earlier rant. This one deals with the prevailing "conventional wisdom". First let me see if I can wrap my brain around the current general media conventional wisdom talking points:

1. The world's massive stimulus efforts are succeeding and "liquidity" is flooding the markets inducing a great rally in equities (risk-taking).

2. "Removing" the stimulus too early may bring about a double dip recession. Keeping it in place too long may bring about rampant inflation and produce more speculative "bubbles". Therefore the Fed must walk a fine line "balancing act" to bring about the best results. As an extension, the general mantra is that the FED largely controls the fate of things.

3. According to almost every economist (to a person) the recession is likely over but the recovery will be tepid and weak. A jobless recovery so-to-speak. (oxymoron if you ask me)

4. The Fed's historic monetary stimulus efforts "saved" us from going over the "brink" of a great depression. (hubris?) Without these efforts, we would be far far worse off.

5. The Lehman bankruptcy caused the financial turmoil in the markets in 2008 and the great decline. The FED "allowed" Lehman to collapse. This was perhaps a "mistake".

Ok, where to begin? Let me begin by first stating that many traders like to pride themselves on not accepting conventional wisdom. After all, conventional wisdom represents the herd. And betting with the herd will work for a while but eventually a cliff will be reached. Think lemmings.

I will say that governments tried desperately for 17 months at stimulus measures. Look up the numbers. The FED and treasury had already spent trillions even before the December to March final wave down occurred. Fear ran rampant despite the Fed's efforts.

The number one media mantra of "walking a fine line" between removing and keeping stimulus in place will result in success or failure type thinking. This is all hogwash is all I can tell you. If you buy what the media is spewing out on this you might as well listen to "analyst" upgrades on stocks and trade off of that.

Let me interject a bit of logic in this equation; the underlying reason the general media spews forth the "walking a fine line argument between stimulus and not stimulus" is the underlying conventional wisdom that the Fed does indeed control the fate of the economy.

So taking that next step further, if you believe the FED controls it all, then you must believe in the general media mantra of the "fine line" argument! You cannot separate the two with logic!
Therefore you accept the general media's number one conventional wisdom!

And you now agree with Jim Cramer, financial guru of the masses. You are trading on Cramer-logic!

Ok about the economists: They never have been correct about anything. If ever there was a herd mentality who changes their tune based on what the stock market does, it is economists! They predict doom and gloom at major bottoms and predict rosiness at the tops. They have predicted a jobless recovery for one reason only: The market is rising and jobs are not! They followed two tapes at once LOL!! They cannot see anything but the trend at hand. Nor does their jobs allow bearish behavior in general. Its a great conundrum they will never overcome. Just like "analysts".

The Fed "allowed" Lehman to fail and it caused the panic of 2008. Hogwash! The market was already breaking down hard. There were so many potential "disasters" in 2008 it wasn't funny. Lehman just happened to occur near one of the key "breakdown" spots.

Again believing in the omnipotent Fed that "allowed" the failure...just think about that. Let it sink in. And now think about this: Who saves the FED? Why is it that their balance sheet is allowed to bloat to trillions? Is it a matter of "good faith"? What if that faith breaks?

There is a massive movement in which 75% of the country supports an audit of the FED. That is the truth of the matter. That is not supportive. That is mistrust. That is proof of a loss of faith.

About the mantra that the Fed "saved" us from depression; that's a matter of counting your chickens before they hatched if you asked me. And again, if the general media and all economists spew this as "conventional wisdom" I say its likely wrong!

They cannot wipe out the reality of the situation (which is bad and going to get worse) but somehow permabears converted into bulls and all those who remain permabears have latched onto the "liquidity" theory to make them "give in" to the higher powers (mostly power of the FED and GS or whoever). So they still say "it is all bullshit" yet they are bullish underneath because they cannot explain it other than manipulation.

So even the remaining permabears are predicting higher prices even as they remain permabears!

Here is the current permabear conventional wisdom: "Oh a crash is coming, but its not gonna happen until XXXX (insert some random date months or a year away)...Don't fight the FED and GS man!

And now after all these months, traders have locked onto this "conventional wisdom" and it has permeated their thinking. Even the smart traders and particularly the permabear traders. You are trading with the likes of the general media's number one talking point (Fed is in control - always). You are trading with the idea that "stimulus" is the only cause of the rally. You are trading with the idea that you must "foresee" when this stimulus will end (a lot of it already did end by the way). You are trading with economists. You are trading with Cramer. You are entrenched with the herd mentality.

You are the conventional wisdom.

Good luck with that.

SPX Channels (and a little rant)

I was reading the free EWI TA handbook and realize I don't often use a good technique for channeling to help identify a wave structure.

(<-------------Click on my links and join Club EWI to download for free)

Applying the channeling techniques to this last Minor C impulse structure works well in confirming where I have placed my Minute wave [i], [iii] and [v] tops seem to be a good count at the moment.

The base channel is the blue channel that encompasses Minute [i] top and a parallel line connecting wave [ii] low and the start of wave [i].

The acceleration channel is what wave [iii] exists in and I have that as the pink channel on the chart. Note the acceleration channel advances above the blue base channel. In this case the advancement was accomplished on weaker up volume ratio that the Minute [i] surge (which had a 14-1 day in it). This is what tells me that the rally is likely waning.

The deceleration channel is where Minute [iv] traces out. That is the black channel. Note that the end of Minute [iv] bounced off the top of the base blue channel which according to the handbook is a normal occurrence for the end point of a wave 4.

And then a weak Minute [v] - I have the substructure labeled as an ending diagonal type move - breaks above the deceleration channel to Minute [v] peak. The hard reversal helps me confirm that it was an ending diagonal move.

The drop since 1080 peak has dropped well back inside the base blue channel which according to the handbook is a clue that the 5 wave move up is likely over.

So what can we expect next? IF Monday the bulls find some moxie and attempt a run higher yet again, there are a couple of likely stopping points should my interpretation of the structure turn out to be correct. The first is resistance in the upper 1050's to 1060. The second would be the blue channel boundary itself. Perhaps a "backtest" of the upper blue channel line.

That is giving the bulls the best benefit of the doubt. Actually having the recent pullback low of 1041 as a Minute [iv] low is my alternate interpretation. However if that is the case trying to apply these simple channeling techniques would not work at all.

Ok now the rant:

The conventional wisdom for the past few months is that the government is "saving" the market in one huge conspiracy and that it is all unstoppable or that the FED can pull the plug any time they choose. Do not fall into the tempting trap of thinking you need to guess the FED's next move to stay on the right side of the market. Oh how short people's memories are!

The wisdom for 20 months since the summer of 2007 was that the government was going to save the market. Indeed the government tried every desperate measure during the whole P1 decline and yet the market lost 57% and 900 SPX points!!

Yet somehow everyone has now suddenly agreed that it worked! And that it will be on the FED's shoulders to keep it afloat. That you can think they can even keep it afloat is absurd. The pressure on the FED is tremendous. They are human. They are subject to the forces of social mood as much as anyone else.

Its ironic (or predictable) that people who do not believe that markets move on news or a self feedback loop will somehow believe in another reason.

The FED cannot control social mood patterns. They cannot control interest rates. They cannot control "prices". They cannot control "stability" They cannot control fear, nor greed! They cannot control unemployment levels. Worse yet they cannot even agree amongst themselves (publicly) if we are in inflation or deflation! They cannot induce confidence.

This is not to say that they are not corrupt and that real conspiracies do not exist. Indeed corruption and conspiracies have their part to play in the grand scheme of things. And corruption is on a roll no doubt.

Social mood is correcting a Grand Supercycle wave III advancement of over 220 years in size and length! That correction did not end on a sharp "V" after a mere 9 years and part of that nine year correction some prices made a new high!

The FED and government are not omnipotent. They are the herd. They are in fact powerless to prevent what the future holds. But this does not mean they are not corrupt nor will turn to fascism to enforce their hold on power. Regardless the financial markets (social mood) will not approve no matter how it all turns out.

The Emperor indeed has no clothes.

Friday, September 25, 2009

Print Media is Tame, Compliantly Bullish and Unaware

Finally the perfect storm. Part of Elliott Wave theory is looking for "contrarian" clues that allow one to take a position opposite of the majority of the market. In other words, contrarian signals helps one determine if its "time" to move to the other side of the trade when the opposite gets too crowded. Along with sentiment surveys and EW structure interpretations, the media is a another clue on taking a contrarian position at major turning points.

When the media splattered stories all over in late August about how stocks would fold in September I took pause and had rightful doubts about coming market moves. I had to experience it to see it that their bearishness would = bullishness for the markets. I wish I had followed my instincts more I would have made better calls and gone against the EWI grain of calling an early top when it mattered.

But now my sense is that they (media) are completely enamored with all the old bull market trappings: IPO's, Mergers and Acquisitions and "emerging market mania" gold, etc etc.

But the subwaves are subtle to the untrained eye. And the nature of the "smallish" daily losses are almost imperceptible even though the DOW dropped 258 points from a peak in less than 3 days. Remarkable they didn't notice. The indexes trace an almost invisible 5 waves down from a 1080 peak to a 1041 low in what appears to be a wave (i) move and they don't see it. The media seems to have finally thrown in their bearish views. It was a necessary development for P3 to take form which is my primary count.

Its finally become the "same old, same old" complacent stock market to the media. They have been tamed even though technically and sentimentally a slew of indicators are screaming "SELL NOW!".

Its only fitting. The print media (I don't watch CNBC) is usually wrong.

There is nothing of importance happening this weekend. There are no bearish "stories" to report nor is the media full of trepidation. Which of course means Monday may be very bearish indeed. We are coming to a juncture where a nasty little wave (iii) down breaking 1040 support will occur. Perhaps a bullish Monday first, but watch the tape carefully.

There need be no "catalyst" for P3. If you think the housing report or other such nonsense cause the markets to turn south...again...re-read my piece here:


Elliott Waves frees oneself from the noise of the "news".

RIM



Ok most readers know to completely ignore these kind of stories or "news". They are just fodder and "noise" and the media's attempt at explaining why a stock dropped 17% in a matter of hours.

Its still criminal though and every once in a while I like to point out what a crock of crap the media and their "news" is. Sometimes I read a story to get a laugh and sometimes the absurdity of the Great Ponzi is insane when you think about it deeper.

Example quote:

"Even more of a concern was the outlook for the crucial November period, in which average selling prices, or ASPs, are expected to be weaker due to the late launch of new devices during the quarter."

HUH???? What a load of made-up gibberish. Its criminal! I had to laugh thinking about how the person who made this load of crap up was probably laughing themselves as they wrote it. Is it true? How the freak would I know? I do know this: Its all media gibberish.

The media saw a big huge price drop so they had to invent some explanatory reason for the ever-gullible public.

if you as a trader BELIEVE ANY OF THIS BS then you should't be trading.

RIM dropped because they were technically due to drop (and they likely had finished an EW pattern at a market top). RIM is a favorite beat stick of tech.

Another quote:

"Revenue is expected to be between $3.6 billion to $3.85 billion. Analysts had been expecting $3.92 billion for the period."

My gosh thats a lot of coin. RIM isn't going bankrupt!

But I had a strong suspcion RIM was finished for now. I posted a chart the day it topped saying so


Coupled with a likely P2 top (or close to one) its a toxic mix for a company to announce earnings at the peak. It doesn't matter what they said, or what they reported it would have dropped anyway.

Think about it. Here is a further extrapolation of the "reason" RIM dropped so hard:

"The most worrisome part of the forecast, however, was the company's ASP outlook. The company expects average selling prices of $340 for the November quarter, while many analysts were expecting ASPs in the range of $340 to $350"

???!?????!!!

WTF was THAT gibberish>>>>???

LOLOLOLOOLLOLLOLLOLL!!!!!

The Cramers of the world need be in jail including the print media who make up stuff like that.

We know what a racket the whole thing is but the astonishing thing to me is how much the average Joe stills believes that "if its printed, it must be true" particularly when it comes to markets.

And watch, go read the RIM Yahoo board where they actually debate the merit of "ASP" pricing or whatever.

Please!

AMAZON who is at 60 P/E and earned a measly .32 cents last quarter (RIM earned a $1 or more) is still floating above $90. Yet my crappy October puts (my first option trades - I got lazy in their charts!) are like toxic poison. I am a loser because of bad timing although I think I will at least come out even.

The moral of the story: Markets move first then the media invents the "news" to explain why.


The Stakes are High



Most of the readers of this blog know that I am a severely bearish on the markets. In this post, http://danericselliottwaves.blogspot.com/2009/08/p2-massive-grand-supercycle-backtest.html I suggested that P2 was merely the DOW"s biggest "backtest" move of a very large scale channel line that goes back hundreds of years.

I suggested that at where the top of a Grand Supercycle wave III should have stopped, we decided to keep the party going from about 1996 onward via debt. It was mankind's decision to do this. We surged way above the long term channel in an overthrow move. We cannot just blame the Fed. Not just Wall Street. It was us. We wanted it. We got it. We enabled and elected out government officials to carry it all out. We cheated nature for many years. We wanted the world and we wanted it now.

Oh we may think its someone else's fault, but collectively we supported everything. We supported the tech bubble, the housing bubble , the stock market rising to parabolic levels, we participated to the fullest. We borrowed from our children at an exponential rate. Well at least many did. And now we are indirectly supporting the government debt bubble.

The top of a Grand Supercycle III rears its ugly head in the form of one of the most powerful emotions: greed. And if greed cannot be satiated, greed turns to anger, fear and anxiety all at the same twisted time.

I suspect the real reason social mood is foul is because the general public is more pissed about not getting their slice of the pie (or losing it through greed) rather than thinking the whole thing was a perversion of nature's balance. So greed is still pervasive. But now it is turning to an angry, fearful and anxious greed. And that is a toxic mix.

Hrmm, I was only going to talk about charts and I got off track a bit...

Channels exist on the very small scale and very large. Its a basic tenet of EW theory. I propose that this Primary wave 2 is merely a huge backtest of the "good times" we had above the Millennial channel.

My first chart shows the scope of this "suprachannel" (I just made that up). Its the purple parallel channel lines.

The second chart is zoomed in on where the DOW currently stands. The DOW obeyed the line as resistance, burst over it in a fit and now has settled back on the line. A continued unabated move staying above the line means we are in a new bull market, at least for a while. A failure back under means one thing: We will work our way to the lower purple channel line just as all channel moves of all sizes behave.

Hence the bear market low calls for 1000 DOW.

So those are the stakes as I see it. The stakes are high. Call me crazy, and I don't pretend to know the future. However thats what the long term wave count calls for in the primary count.

Whats the alternate? Something else I suppose.

Elliott Wave Update ~ 25 September




A new low today. The SPX has retraced the maximum amount just about at 1041 for the alternate Minute [iv] scenario. It cannot cross 1039 where I have a potential Minute [i] top occurring.

Regardless, the Fibonannaci retracements back up align very well with key resistances. They would likely have to gap it up Monday and run with it to try and regain 1060 level.

I give the bulls the benefit of the doubt for Monday's opening because the E-minis, all hours shows positive divergence on stochs and MACD and it aligns with a wave (ii) retrace and works very well on the squiggle count. Don't fall in love with that though because P3 will wipe out the positive divergences as much as P2 wiped out the negative. We'll see how Sunday night and overseas plays out and such.

But here is what I am thinking for Monday: They gap it up and gun it hard over 1054 resistance on Monday and make a run for 1060 breaking some stops and try to regain 1060. It then gets smacked down hard by the bears who pile on at 1060 and bulls unload and we then get a hard reversal busting downward through 1041 support zone and a nasty little selloff occurs.

Well that's what would fit my wave scenario for the squigglies anyways and would mark a wave (iii) scenario down.

The bottom line is the indexes are at a critical stage for the bulls come Monday. The markets are on the verge of confirming at least an intermediate trend change and the bulls must reverse the slide come Monday to keep it from happening.

The VIX jumped up a bit more today, so it appears their is real fear occurring underneath the surface. Speaking of the VIX it has tried and managed for many trading days to keep the downtrend intact by not allowing the 20DMA to make a bullish crossover on the 50DMA which hasn't occured since the Intermediate (5) down in late February.

However it is at a junction where it is almost inevitable. That crossover would likely coincide with a wave (iii) down and help the VIX break over the wedgeline it has been trapped in for a year.



E-minis

Noticeably absent again from the hype media (online anyway) is news that the sky is falling.

Which means it likely is.

Good luck!

Thursday, September 24, 2009

Elliott Wave International Free Stuff Post

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Elliott Wave Update ~ 24 September (Update)




UPDATE (6:20PM) Tech really dumped hard in A/H's led by RIMM. qqqq's are now making their new lows LOL. This is not good for the bulls.

Update 2: corrected the date

Downside was pretty good today on decent volume. Some quirky things were going on. Allow me to explain how I see today's price action:

1.) Banks are leading down. They dropped hard again today. The banking index is damaged.

2.) Oil dropped again and continued the decisive break of its rising wedgeline. I can see it going back to $58 support soon. Cannot say this is "bad" as cheaper energy can be spun any way you want to.

2.) The DOW curiously was "held up" and not down the same percentage in relation to the NASDAQ. When one sees the DOW wedge in unlogged scale you will see why. It simply hugged the lower trendline. I show that chart. This percentage divergence is potentially bullish for tomorrow.

3.) The markets tried desperately all day to prevent from allowing a 5th wave new low to "confirm" a 5 wave down pattern but they lost in the afternoon. All 3 indexes made new lows which is bearish because it confirms a 5 wave move to a new low. Therefore wave iv likely traced a sideways double three combination corrective pattern.

4.) The qqqq's did not however make a new low. So this could imply a bullish retrace wave back up. I am thinking the bulls challenge 1060 again at least once and levels higher if it can take 1060 back. If it cannot be done soon, then things could get real ugly for the bulls. The market is now set in motion and a fear pang has risen from a VIX low.

So I charted the squiggles in a straight up manner. And am looking for a bullish rebound (EDIT: I should say the term wave '2" rebound. Bullish sounds... misleading.)

The bottom line is that the market is on a "cusp". It has yet to really absolutely confirm a short term reversal. It has one day to save itself. It probably will and go into the weekend with the bears full of doubt.

The alternate is that we are at or near a Minute [iv] low (which I do seriously consider by the way). One thing about the sideways low price action moves today is likely a bunch of shorts piled in. It won't take much to goose it and break a bunch of stops up. Overseas markets will be telling and may effect how the US market opens.

But P3 is all about downside surprise and a break of 1044 support tomorrow would certainly be that surprise for unsuspecting bulls.

Be on your toes.

E-minis

The best thing for the bears is no gap downs. At least not until 1000 SPX. Gaps are just open targets either direction. Well anyways, we'll see how much conviction the dip buyers have left in them.

And there are about 8 uncovered gaps up from 666...

Wednesday, September 23, 2009

The Bullish Count

No charts! Its just the same crap I show every night. Triple Intermediate zigzag to P2 peak.

I keep getting asked by many people lately for a "bullish" count (I take that as a contrarian sign). In fact they seem annoyed I don't have anything but a "P2" count or a "P3" count. Well why would I? That count is based on much longer term counts to include the start of a Grand Supercycle bull wave in 1780 or so and it ending in 2000. I'll change that when I need to. And I am far from needing to do that.

A "normal" wave 2 of any size will retrace anywhere from low end (38.2% or about 1017 SPX) to the high end (61.8%-1200 something - bah lost my chart). The 50% mark is at 1158 I think.

Even the current September rally, we are calling this a Minor C of zigzag (Z) from the early July 869 low. Within Minor C it can expand to 100% of Minor A which is about 1120.

So why would I change my count if my count shows the "flexibility" to allow a higher move? 1120 is still some 60 points away!

So yes the bullish count is that today's peak is only Minute [iii] of C and now Minute [iv] is playing out. But I don't prefer that count at the moment. That may change in a day but thats the way it works. I have a primary and a valid alternate. But bullishness is way high. To expect it to go higher on waning momentum is pushing things even for a permabull.

The bears pushed things at 670 SPX. They got burnt.

But as for now its playing out beautifully. And 1080 makes a pretty damn decent looking waveform for a top. So why wouldn't I suggest it so? All the parts and subwaves are there. Do they count and look picture perfect? No! Corrective waves never do! But they certainly count well enough.

Confirmation of a trend change? Not yet. And I don't suppose the market will make it easy for us - bull or bear.

But I am way more scared of P3 than I am of P2.

The DOW Wedge (Updated with OIL)



In some ways, its always actually about the DOW. DOW patterns, DOW moves, etc.

DOW 10000. Hit 9917 today.
I need to ask a technical expert (I am a layman) about wedges and where they typically resolve.
The last zigzag up in the DOW is a very nice wedge indeed. It hit the upper line and now seeks support again.

At the least can't we expect some jiggly waves to go with that drop down from peak to form an ABC pullback or a 5 wave move down visible other than on the tiny scale? Just asking. A pure reversal on a drop like that (without making new lows with at least some jiggly down waves) would indeed be worthy of a P2 move.

Notice Anything about Media Headlines?

http://www.marketwatch.com/

I checked about 5 mainstream sites.

Its all quiet on the selloff of the afternoon.

Generally every time the market farted downward 10 SPX points they are quick to paint a "the market cannot sustain", or "the rally is over", "here comes the big correction!".

Tonight? Silence. Maybe the media has finally been mesmerized.

They are all caught up in Mergers and Acquisitions rumors and IPO's and all that old bull market crap.

They are strangely silent on a DOW 177 point drop in 90 minutes and closing near the low.

"I think there will be a lot of upside surprises," Kleintop said. "In the second-quarter, we saw better-than-expected earnings mostly on cost cutting and little revenue growth. This time we'll still see the impact of cost cutting but I think we'll also see revenue growth."

In fact $BPSPX bullishness stayed at a near record high of 88.6 Its a perfect bear setup.

5 days of choppy gains wiped out in about an hour. Yet silence.

P3 is nothing to be toying with.



Four Horsemen of Tech




Apple, Rim, Google and Amazon look finished. Completed wave patterns on all of them. I was looking for highs on each and every one and it didn't disappoint. Shooting stars on each.

Apple nearly hit $190. Google hit that magical $500 mark. Amazon kicked it into high gear these last few days and squeaked out a new high by a mere .10 cents! Rim? Yup. Lets buy some Rim at $86 again. Sure.

But more than that they all completed valid wave patterns and all finished up with 5 wave moves. You can see them if you look. I am too lazy to label all the charts but believe me all peaks are in on a clean 5th wave of likely C waves of likely double or triple zigzag patterns. Look closely you can see them.

A valid double or triple zigzag pattern requires new highs for the end of the zgizag. I didn't think amazon or rim would make it these last few weeks but they came through in the nick of time. How convenient.

P/E's of 61 (amzn), 32 (aapl), 34 (goog) and 24 (rimm) in the middle of a bearish consumer depression. Yes even buying gadgets will wane...And don't we already have enough of them anyways?

I know I do.


Stick a Fork in P2

Even if it makes a new high. Even if this is just Minute [iv] of C.

Did you see that price action? That wasn't some futures manipulated opening. That wasn't some MM-induced jerky move. That was waves of selling and it impulsed hard. People tried to buy "the dips" along the way and got steamrolled. It was a flash of bearish price action. A taste of what is to come.

When the first rally spark upwards from the 666 low ignited, I too thought for a few days that it was a wave 4 rebound. But in my heart, I knew something was amiss.

Today's selloff just had that feel particularly since the whole rise from 1057 to 1080 counted very well as an ending diagonal. No its not a classical ED but the ones that "work" best never are. I left my house at 3:30 and just knew when I came back the market had sold off a whole bunch more. And it had.

The ending diagonal wasn't a "classic" but it fits well enough and the selloff confirms the pattern.

I'll admit I am a permabear but that is only because I have educated myself in whats going on. Read my blogroll links such as Mish's or Dr Housing Bubble or Zero hedge and you too will realize that things are scary out there. I mean scary.

The financial system. The shadow banking system. The economy. Its all a house of cards. And everyone knows it.

Think Benny and Timmy don't know it? Of course they do. They just threw the farm at the whole thing and are hoping something sticks...

They would have been better off just giving everyone cash. Big checks would of kept it going for sure. But do you think their tightfisted greedy ways leaves any scraps for Joe Average?? No! They will own your land, tell you what doctor to see and let you know when the bank is open to get your hard earned money.

Oh yes social mood is turning my friends. Its turning.

Weren't the bears insisting that wave 5 was still to come at the 666 low? Isn't it just a sorry ass state of affairs when the bears, who have fought the disbelief rally all the way up now insist we haven't finished it?

P3 is nothing to be screwing around with.

The bulls flinched today.

Elliott Wave Update ~ 23 September



The move from 1057 to 1080 definitely counts best as an ending diagonal. The subsequent collapse in prices confirms it, The question is, at what degree? Top of Minute [iii] of C or true P2 peak?

I'd rather think its P2 peak. The Nasdaq only half filled its breakdown gap from 2008 and that is exactly as the DOW did in 1930 when it only filled half its 1929 breakdown gap. So in that respect...you got to take pause.

The DJUSFN made a new high today which very nicely caps off a 5th wave peak.


Squigglies

Well, we had a 5 wave move lower. Keep buying them dips bulls! What happens when everyone heads for the exits all at once?

I read an interesting story today that its almost as if the bulls are playing a game of "chicken" right now with the markets. Maybe someone flinched.

Or maybe just the true Minute [iii] of C top. We shall see.

Minute [iv] of Minor C


There is decent evidence still that the SPX and DOW are still trapped in a consolidation Minute [iv] wave. Some guesses if this is the case is an expanding triangle or a double three combination which I suggested the other day may happen.

In relation to "size" its starting to "look" right as compared to the rest of the Minor C structure up.

How bullish the Minute [v] will be is anyone's guess, but I lean toward P2 ending with a grand fireworks show befitting a rally of this historic nature. Therefore it could be a blowoff top that just snaps every short stop in place on the market. And then a tremendous "rush to the door" effect on the downdraft.

It seems its 10000 DOW or bust. Ending on 9,999.99 would be just perfect.

Or it could rollover.

But I like the fireworks idea. But first we need to confirm Minute [iv] is over.

Tuesday, September 22, 2009

The Dollar Chart (UPDATED)



UPDATE: 22 Sep 9:43PM: I relabeled the Minor 5 as I missed the proper Minute [i] and [ii]. I think we hit [iii] and [iv] already. For a lower target in the 74 range to be hit, Minor Blue 5 will need to extend which it could very well do being that its a commodity and commodities often sport extended 5ths. So a few more Minuette waves. Wave-wise, the dollar actually traced enough to qualify for a low.


I am looking for a gap down, likely an exhaustion gap, on the dollar. It could sell off very hard as it is at its last little rung of support at 76 before a potential big move down to 74.

An exhaustion gap will likely have an effect on the media stories of the day proclaiming the death of the dollar.

Bulls will be a record low. Of course the indexes would likely have an exhaustion gap to the upside.

74 is solid support for the dollar.


Elliott Wave Update ~ 22 September







The NASDAQ is the first index to have finally arrived at its "breakdown" gap down from 2008. The gap down exists from 2152.69 - 2183.34. Looking at the weekly you can see that this zone goes back for 5 years. At many times it was resistance, then it became support. Then it was exactly where the "breakdown" gap down occurred in 2008.

The NASDAQ looks, on the surface, to be tracing an intraday ascending triangle. And that triangle would be right under major resistance zone spanning 2150-2187 so it has potential. However I also have it charted as an intraday ending diagonal potential. But be aware of both patterns. The open tomorrow will determine which one it is.

The NASDAQ may be finishing up Minute [iii] and perhaps the SPX and DOW are working on making a new Minute [iii] high and we have yet to see the Minute [iv] of C.

However looking at certain secondary indexes such as banking and real estsate, I have posted these charts showing that both indexes are likely heading up for their Minute [v] tops. And that is ok, we can suppose that all indexes will not top at the same time that wouldn't be normal.

Lastly the curious gap up today remains uncovered. Which of course leaves the most confused which is what the market is wont to do.

The NASDAQ again making a new recovery high and the other indexes do not for 2 days in a row is sometimes considered a bearish development by EWI because it shows intra-market divergence. But these divergences haven;t been working out too well lately. However I still have to mention it.

And here is a curious fact from the 1929 drop of the DOW: It also had a weekly gap down or "breakaway" gap. The 1930 rally only partially filled that gap. It wasn't completely filled until 1954.

E-minis

The energizer bunny market. Thats a freak move jumping out of the downchannel and back into the up channel at the same time.

Good luck.

Monday, September 21, 2009

Despondent Bears




Traffic is noticeably dropping on permabear sites throughout the blogosphere the last couple of days (or is it just a Monday?). I think bears are thoroughly beaten, dejected and some have even jumped in the bull bandwagon I am sure.

I however grow more excited every day. Thinking that Minute [i] (the 1039 top) may have been P2 peak excited the bears for one last time. But breaking above 1044 has crushed their spirits. Bears are no longer interested in technicals, wave patterns nor anything else. They won't short it anymore, they lost too much. But yet evidence is that we are in wave [iv] and that the top is just 5 subminuette waves away! That excites me.

(By the way I went long today - and holding - on ETFC at $1.82 - it did have a burst higher today as I suspected it might)

And still the SPX holds above upper supports. It seems inevitable that its going higher. And even I have it marked down needing one more high. But will the 5th Minute wave ever come? Reminds me of the missing 5th wave at 666 low....

But this is not a thrust out of a triangle and the waves better count as a correction back from 1074 rather than impulses. So one more upside would make for a nice wave structure indeed.

The chart I show is something I have had for quite some time. I drew the P[2] label on it many many moons ago (ok in March). Yes the P2 got tweaked as the "unbelievable" rally proceeded but in reality it is right where it is supposed to be. It has the right "look", the right feel and an exceptional 3 wave "ABC" corrective look about it.

The contrarian-contrarian statement of those who continually say, "Stocks won't go down because everyone expects them to go down" is finally losing its firepower. I mentioned a couple times in late August when the media was trumpeting that September was likely to be bad made me pause immediately that the media goons were mucking up a good bear month. And so it was...so far. September has been golden.

When October rolls around this time, it won't matter what the media presents....its gonna be an ugly month. So the contrarian-contrarian-contrarian play is that stocks do fall hard in October.

But I digress.

When permabear sites lose traffic, it is a sign. A sign that the peak is near. Sick of waves. Sick of technicals. Sick of hearing about "P2".

55 Fibonacci hourly cycles. 144 Fibonacci trading days. Take a look at sentiment. 88.2!
It will turn.

We are trudging above 28,500 feet and on oxygen. Keep focused or we shan't make it to the top and get down alive.