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Wednesday, February 17, 2010

Elliott Wave Update ~ 17 February [Update 7:46PM]

[Update 7:46 PM: I wish I had noticed before, but there was a perfect 89 Fibonacci trading hourly candles from the top to the low in the DOW and SPX.   The next Fib number lower is 55 and would be a perfect time ratio between waves [i] and [ii]. Currently the rally has I think 51 hourly bars. With the current rally needing a final wave to complete a nice squiggle count,  a wave [ii] high occurring around 1pm in the afternoon would be perfect.

[Update 6:10PM: My dollar count is different than EWI's.  The move from the low looks like an equal-leg ABC. Since we suppose that it is not, then I am gambling here and suggesting that we are about to get a big third of a third wave up.  This of course would not be ignored by the markets. Liquidation events should occur. The danger is the daily Daily Sentiment Index is 90% dollar bulls (courtesy EWI). Very one sided but sentiment is a funny thing in commodities and particularly since the dollar is mainly going up against the EURO which, in my estimation, is a doomed currency because basically social mood is going to ensure it ends badly. 

The Germans and French and Spanish and Italians and well, all those nations under one young currency yet no true common political union.  (By the way I am a Europe watcher and I follow things including the political end of things.)  I don't mean to offend Europeans who read this blog but its just a matter of time in my opinion.

The dollar chart supposes a series of 1's and 2's.  The alternate is that a wave 5 of (1) is commencing. Why 1's and 2's and not waves 1 thru 4?  Five reasons: 1> Look at how the RSI can move big.  2> There is all overlap no "single candle moment" that typically signifies a third wave.  3> I think if the dollar breaks the near-term resistance and pivot, it can run pretty far  4> the internal subwaves of where I have marked [i] does not count well as a wave 3. 5> It aligns with the overall market count in that a wave [iii] down is about to commence.  

Here you can see the potential reversal candle up. Needs to break resistance and then it might fly a bit.

[Update 5:35PM: I haven't forgotten about BIDU as I have a very large trade on it.  The daily candles painted a black candle. Gap up and then closed lower and filled the gap.  It could mark a potential top. However today was very low volume pullback and could be a wave four of some degree so there is no confirmation obviously and we have to wait a few days to see what happens.  BIDU largely depends on the market's direction.  A nasty wave three down in the market will likely drag BIDU through the mud which I was hoping.

It will be interesting when the CCI and ROC uptrends break.  Could be a sell signal.

BIDU's long down-trending daily RSI has held the advance so far.  I was counting on this to stop the move and so far its holding.  We'll see. BIDU's overall count and trade is also based on the overall market ready to take a crap sometime...well...whenever its ready.

But you got to admit, BIDU is wedging at many degrees of trend. And all the gaps is not exactly a healthy thing.  Its a high beta stock in both directions.

Today was a bit of a sideways day which was pretty much expected as the wave structure requires a wave four of some sort.  I use the NASDAQ as it is making nice waves at the moment. Wave iv could be a flat which might mean a fakeout hard wave down in the A.M. tomorrow before reversing and running higher to a peak for this current up structure.

The blue box retrace target lies just above and the NASDAQ failed to reach it.
Here is the hourly showing the blue box target area. This blue box area is the method I use to target a wave two retrace. Sometimes its called the "challenge box" as this is where the market broke down on the previous wave down, so its likely where the market wants to test to see if it can be taken back. If the market cannot take this area back and hold, a wave 3 can commence.  This is just something I have noticed about wave two's of any size (including P2) and we'll see if it holds true.
Here is the updated RUT chart and I haven't moved the red resistance line I painted last night.  It stopped at the Sep and Oct 2009 highs.  You can see the RUT covered its blue challenge box area.  If the RUT can take and hold 625 (and thus the blue box) it can go on to challenge perhaps a new high altogether.  I am betting it holds as resistance. If it does not there resides more resistance at 633.   Its already a very deep retrace and leading the markets.  If it heads down early its something to watch for.

As a note, the previous rally from 2 weeks ago shows that both the NASDAQ and RUT failed to hit the blue challenge box area. But this rally they are making up for it (at least the RUT has so far)

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