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Thursday, February 11, 2010

Elliott Wave Update ~ 11 February [Update 9:48PM]

[Update 9:48 PM Ok last - last chart, This chart is a closer look at how a subwave two can retrace deeper the previous wave two of higher degree. It happened in 2008 as I explain in the update below. So yes tomorrow could end in the upper 1080's for all I know and we go into a three day weekend full of great doubt.

One last thing, the NASDAQ and Wilshire have been on their own course as they may have had a truncated top but I am not sure about them just yet. But the DJIA matters and the SPX seems to be in the same wave count so I am using them for the time being more than anything. ]
[Update 9:02 PM:  One last chart. Is anyone full of doubt a great selloff is coming?  I know I am, yet I am trying to maintain a bias.  Watching the market drop quickly from 1150.45 to 1071 didn't allow any good entry for the bears.  A retrace to 1104 was not a convincing Fib percentage and yet again bears probably questioned the pattern. Then the subsequent drastic 35-1 selloff was either caught the previous day or the move was missed as it was a one day affair followed by a surprising second day that bottomed at 1044 and rebounded quickly. Any bear caught shorting near the end that downdraft is hurting and underwater. 

Now after 4 trading days, the market has tacked on some 36 points and threatening more.  The entire EW count doesn't make sense as the (ii) of [iii] retraces 61% (or more) and the bigger degree [ii] hardly made over 40%.  So naturally bears are hesitant particularly if the market ends tomorrow on the flat side or with an up day.

This market will do what it must do, but it makes profiting from the short side a tough slogging.   Even if the market started to drop precipitously and broke the key pivot of 1059, who wouldn't be hesitant to jump on the short side thinking it may be "caught" by buyers yet again? 

I'd say the waves are doing a great job of instilling doubt and fear on the bears. The Minute [ii] failed to instill doubt yet left the bears empty-handed with a short entry (unless you jumped in anyway).  The (ii) of [iii] is allowing a good entry yet bears doubt the pattern and doubt a great selloff is just around the corner.  

But I will show you some recent history on where this subwave two retraced higher than the previous lethargic wave 2.  It was [ii] of 3 of (3) inside P1 in 2008.    Many in the summer of 2008 was sure the SPX should retrace higher yet it never quite made it to 50% of the May - July 2008 drop.  And then it dropped precipitously only to have a deep retrace in the next subwave [ii].

So  I look at it this way:  Things are not acting "strange" they are behaving just as they probably should be.  

P3 may more resemble the way it dropped from May-June 2008 rather than the way the market dropped from Oct 2007.  It makes sense as P3 is the strongest wave, we should be comparing its starting point at the top of (2) of P[1] and not the cycle top in 2007.  Perhaps this is wishful thinking.  But it does make a bit of sense at least. Just a thought.

See what I mean in the chart below.]

[Update 7:17 PM: I wouldn't be surprised to see the banks pop up again tomorrow. They may be forming yet another triangle and take another stab at challenging key resistances again.]
[Update 5:10 PM:  I have shown in the past how Minute [iii]'s tend to launch from at or just above the zero line on the McClellan's Oscillator.  At least they did during P1. When the market topped at 1104 some trading days ago, the NYMO was still -21 and it didn't work out when I thought it would. At the time a 50DMA backtest move would have made the NYMO maybe go back to zero. Of course neither happened the backtest move occurred nor the NYMO moving back toward zero..  

But now the NYMO is just about zero and close enough for my liking to kick off the rest of a Minute [iii].  Thats a great spot to launch a destructive wave (iii) of [iii] down from.  Also note the negative divergences on the adv/decline, the up/dn volume and the daily tick as compared to the other day. In fairness I should credit EWI for pointing this out although its something I would have probably noted too. Also note the CPC finally got corrected downward a bit]
[Update 4:55PM  BIDU's daily arguably has the typical "overthrow" of the converging upper trendline of an ending diagonal triangle pattern. The RSI is at resistance and showing long-term divergence.]

[Update 4:32 PM  JNK finished in the red on higher candle volumes after hitting its retrace wave ii of (iii) of [iii]. This is one chart that seems to be leading the markets.  After all, P3 is the Ponzi wave that focuses on debt instruments of all kinds.    ]

[Update 4:25PM: Bidu's running a tight channel higher.  The whole thing from $406 looks like an [a][b][c] which fits the huge ED scenario.  Of course the imminent price collapse is probably dependent somewhat on having the overall market count correct in that (iii) of [iii] down will soon commence.  However it doesn't have to follow the market. A "rumor" can trigger these things too.]

Every index traced a triangle as shown below, even most subindex's.  Every index achieved a post-triangle minimum new high requirement for wave c of (ii) of [iii].   The primary count is that (iii) of [iii] must commence down soon. 
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