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Tuesday, February 23, 2010

Elliott Wave Update ~ 23 February [Update 8:17PM]

[Update 8:17 PM: The SPX daily shows the 13/34 situation. A cross seems inevitable unless a hard move down occurs which is what the primary count is at the moment.  Even if it does cross it could turn out to be false. You can see 1113 resistance is the key.  Challenging this mark in A/H's on the futures and then a couple of times on the cash index.  Bears would hope any retrace higher holds under 1100-1104 and then it drops hard on a failure to take back support.

BPSPX, or S&P bullishness actually ticked higher by .02 rather than go down even though the market dropped some 1.2% on average. Thats good for the bears.  That indicates a good deal of people believe this is just a pause or a correction in the charge higher. They may be right. At least bearishness didn't increase.

And finally I think they are voting (or just holding a meeting) on SEC rules for shorting stocks tomorrow.  If there is one piece of news that I fear as a bear, it could be that because that directly affects "the game". But ya never know how the market reacts to such things.  If this is a wave [iii] or 3 down, then its going down.  

The market is always an opportunity.

[Update 7:52 PM: I know I am having no luck with the BIDU trade so far (I'm holding for a Google announcement - which might go against me - who knows), but I like HD's chart wedge pattern.  High volume could indicate an exhaustion if this is a wedge. At the very least, I think they fill their recent gap up. Disclosure I shorted HD today at $30.77 for a long term short trade. Stop is $32.38  based on 5 being shorter than 3 (wedge pattern) Price Target: $22.

Smaller CMF peaks helps confirm the wedge in my view. Short interest on HD of course has dropped to a low in quite a few years.  They squeezed it out.

I know it looks like a breakout and maybe it is, but the waves up are not forming an ascending triangle in my opinion. Rather its a wedge.
You could say HD could hit its blue box target. Remarkbale over 61% retrace since the Housing bubble high. But a constant squeeze will get you there. Of course reality is not that good.  Big resistance overhead.  I don't think it holds it.

[Update 5:57PM; According to EWI, the dollar daily sentiment readings are very high which means it could turn down soon. What I don't like as a bear is that equities have been following the inverse path of the dollar lately.   So add all that together, if the dollar turned down hard, and equities went up, that implies this is not a wave 3 down but a correction in the market and it will attempt new highs as the dollar gets crushed and the Euro gets squeezed higher.

Doesn't mean it will play that way of course with the inverse relationship. The markets and the dollar could both tank at the same time for all we know which is just as likely perhaps now that we have been "tempered" for a positive equity = down dollar relationship for a bit.  As a commenter showed last night, the 1987 crash saw both the dollar and equities plummet hard.

Anyways I try to make sense out of the dollar chart.  Lots of a-b-c's up which may be an ending diagonal triangle.  And since currencies can have extended 5th waves according to Prechter and Co., I drew this one up as one. Here is one potential count. Yes some things look retarded I admit but the currency charts usually do. After all this is a basket of currencies we are talking here!

[update: I actually think I have the degrees wrong and we are looking for the top of Minor 1 not intermediate (1). Sorry too lazy to change it]
And the all-hours hourly chart shows the final wedge potentially forming.  If this played out, then the retrace target area is about 78.  We'll know in a few days if this is correct and how the market reacts.
There is a lot of action going on obviously. Currencies are swinging wildy and the e-minis all-hours has a double-top at 1112.75.  Both e-mini highs occurred in A/H's which means the cash index hasn't traded at this e-mini high yet.  The 1100 line is the battleground area. The e-minis sold off twice through this area in big down red hourly volume candles.  One was last Thursday on the rate hike news.  Today was on the consumer confidence and bank news.  So needless to say, 1100 is an important area in the e-minis.

Yet important support beneath the 1100 area was held firm today.  And you can see the reversal candle occurring as I type. Whether or not it holds I have doubts. Technically there is no positive divergence on this e-mini chart so there is no reason to believe that a near term correction or low has been set, at least using that method or clue.

The down volume bars favors the bears on the e-minis the cash index is not quite as bearish for today.  The SPX closed under the 50 RSI and the DJIA and NASDAQ and Wilshire did not.
The Wilshire index did impulse down in a very nice wave structure today.   But there are a lot of cross-currents going on as we'd expect.   Its a battle right now.
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