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Wednesday, February 3, 2010

Elliott Wave Update ~ 3 February [Update 7:10PM EST]

[Update 7:10PM: Ok, sometimes I get too caught up in the squiggles. But underneath I am keeping an eye on the bigger picture.  Here are 2 final charts tonight.

The market really is all about the DJIA. Its the King.  The DJIA has actually already covered its blue box area, at least the lower one.  Notice I put the alternate squiggle counts on the chart.  My main point is that no matter how you slice it, Minute [ii]'s peak could be coming sooner than we know.  Time-wise, the market dropped 8 days and if it can manage to rally to a new high tomorrow, it will mark 4 days of rally. That is a pretty good ratio for a couple of Minute waves. The ratio is even better if Minute [ii] is actually an expanded  flat that is almost over.
The Wilshire is even simpler. Its 50 DMA resides just at 11500 which is a jog above yesterday's high. That may be the ticket.  It also would be close to the 50% Fib at that spot.   In general, I cannot imagine a very high retrace for the markets (i.e. - 62% Fib or higher). After all, if the market recaptures key support areas, it will have, in effect, repaired much technical damage in the short term. It could of course, but that means we have to be patient.  But after an 8-1 up day, the follow-thru has been ok, but not earth shattering.  

But not only that, it will likely require much higher volume to recapture higher support areas in this particularl market and this wave [ii] should not exhibit that kind of behavior. The 8-1 up day was bad enough but acceptable because prices didn't advance that much and volume was low. But like I said, we are open to whatever the market chooses to do in the near term.

The key is not to lose sight of the primary count: In that this is just a Minute [ii] rally and it will end in pain for the bulls soon enough.

However, one more bullish up day would present some doubt to the bears on the count and targets. My main  point in all this? Be on your toes for a turn down!  EWI actually favors the expanded Minute [ii] flat for the DJIA which means one more push up in a wave v of (c) of [ii].  Its not my primary count because I think some other sub-sectors need to shake out a bit higher (and the NASDAQ) but these do not need to march in lockstep with the main indexes.

So the squiggles presents a few options but they are all manageable from the larger "big picture" count. 

And that reminds me if you haven't joined CLUB EWI, do so by clicking my links to the left. Lots of free stuff. Well worth the sign up. And I get credit for you.

[Update 5:50PM: The financials like to lead. They "bottomed" first recently, and now they may be leading the way down. They are the cycle wave c bear market leader and they will likely remain so until the very end of the bear market.

Notice 5 waves down today. The squiggles on a 1 minute chart look pretty good too. Also notice the severe overlapping waves of the past 6 trading days.  Impulsive down, corrective up. Thats EW theory at its most basic.]

[Update 5:30 PM: And here is the 60 minute chart showing what may be a huge ED on BIDU. The move down from peak could actually be a 5 wave move so I am may be stretching things for my liking. However its right under the gap and if the market is bullish on tech tech next few days, and Bidu reports Tuesday the 9th,  then it has time to work to a new high - which is what we want to confirm the ED pattern.  If not, this is just a huge wave [2] back up]

[Update 5:00 PM: Bidu's chart is finally showing perhaps some clarity. On an earnings run, it reports next Monday. Incredibly, it may be shaping up to be an ending diagonal triangle and it requires a new high to confirm the pattern. It closed today above major resistance and right at the gap down resistance.

Bidu's like a wild horse bucking bronco lately and perfectly represents the dying "asset mania" era. It's huge price swings are violent yet its pattern betrays its future. A Communist Chinese internet stock no less is where we choose to "invest" and give it a P/E ratio north of 100.

I will be playing this chart. If BIDU makes a new high, I think the ending diagonal pattern is confirmed and I will buy cheap puts as I see a price collapse coming. An ED such as this is a rare event and the chance to make a killing with a sharp price swing is too perfect. Hopefully all this will coincide perfectly with a Minute [iii] down.

The waves down from the peak do not look impulsive and are behaving in a corrective manner. This would be expected as Minute [ii] needs likely more time and price.  The best form so far would probably be a double zigzag of which the second zigzag should commence soon. The next best form would be a 3-3-5 flat. That implies a price drop to the 1070's again, and then a bullish retrace back above 1100.  I don't favor this at the moment as it seems the market worked awfully hard today to maintain above 1095.

Also note that the qqqq's finally showed signs of picking up the pace as I suggested the other night and the financials have backed off. Rotation into the laggards.  We have seen this rally order before, financials to get the losses stopped and then qqqq's to finish. That means tech will finish up the rally, and CISCO might "lead" the charge tomorrow. Also Bidu is on an earnings run as is other corporations.

The SPX presents some interesting patterns.  Seems to be a triangle forming. Which way will it break?
The RUT's count is interesting and you can see the move from today's early price peak to the low is a classic looking zigzag down which is corrective in nature. It corrected deep.
I'll have more charts later.
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