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Monday, February 1, 2010

Elliott Wave Update ~ 1 February [Update 6:30 PM EST]

[Update 6:30 PM: A straight-forward look at how the Wilshire may fit into the perceived wave count of a Minute [ii].  The ultimate oscillator does not show positive divergence which is a plus for the bear case I would think. A positive divergence would indicate perhaps that a protracted retrace up move may occur. I do not think this is necessarily going to be the case and this indicator does not refute that view, at least for now.

Also this chart shows the daily volume was not real strong at all. That lack of total up volume is consistent with a retrace move. You can also see how the CCI was deep oversold. Some strengthening is likely needed before a big wave [iii] plunge.  

Trendline channel support gives credence to the bull argument that the "uptrend is intact".  I think they will be burned. 

The 50 DMA is the first order of business for the bulls to repair the technical damage.  They want a close above it.  

Finally note the resistance zones above.  Everything here supports the primary count that P2 has topped. Finally it also is a good sign if you can "count" 5 waves down on the daily and that appears to be the case here.  You can see the wave (ii) bump and the wave (iv) humps and the wave (iii) downdraft.

[Update 5:40 PM: In my observations of P1, Minute [iii] tends to require a launch point from a hair above the zero line on the McClellan's.  Today's move strengthened it obviously.   But you see it has a ways to go which suggests another big up day or more is likely coming. And that would plant seeds of doubt in bears just as a wave [ii] is supposed to do.

Also note the two areas where I show positive divergence on the Intermediate (X) waves of July and October.  If this was yet another major corrective wave inside a still P2 wave up, then we would perhaps see some more down moves and then a positive divergence develop on McClellan's as it did before.   If Friday was the [i] low, then there was no divergence. Just an interesting observation.

[Update: 4:50PM: The financials have arguably "led" the rally in that they hadn't made a new low last Friday. However the rally appears to be taking the form of an (a)(b)(c).  I suspect they will peak first and tech qqqq's would end the rally for Minute [ii]. This order of risk has been played before many times. Thats all assuming Minute [ii] is underway]

[Update 4:30PM: The NASDAQ was a bit more tepid today. Thats expected as it led the big drop down by far. If it can gain a foothold, it can have a big up day.  Notice the long-winded positive divergence on the RSI, MACD and ROC.]
So far it appears an ascending triangle was in the works today which means the move up from Friday's low counts best so far as an a-b-c "three".   You can see by the internal indicators that the up volume ratio ended at a healthy 8.27. However the advance/decline was more muted ending at 3.72. Also total volume was lower than the red candles that brought us down so that indicates a bear wave [ii] rally only. However its the best internals by far since the decline and may indicate Minute [ii] is underway. Healthy internals and an oversold McClellan's tends to attract buyers once again and thats what the market needs to clear resistances.

If this is the beginning of Minute [ii], perhaps it will trace out some kind of double ZZ or an expanded flat.  Notice all the potential inverted H&S formations. If the bulls can keep this going aggressively, the bears could get a surprise. Remember, wave 2's are supposed to breed doubt (in this case doubt in the bears).
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