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Monday, March 1, 2010

Elliott Wave Update ~ 1 March [Update 9PM EST]

[Update 9 PM: Anyone following EW theory knows that non-confirmation counting at tops and bottoms is a big part of identifying major turning points.  Indeed, even on a daily chart, you can do this even intra-day to some success with practice.  Whats my point?  My point is this: If there was never anything occurring in wave counting to confuse us, it wouldn't work as well. The RUT making a new high would be a perfect non-confirmation, particularly since everyone has latched onto the idea that the Russell 2000 represents some kind of "bullish development" for stocks long-term because....why? Beats me! Even EWI harps this idea in a way. 

As some commenter's have mentioned, the RUT had a double higher top in August 2008 when everything was flat and heading out and down.  Was this bullish? Um no, the RUT crashed so friggin hard after that August top it wasn't funny.

The other index that has gone above 78.6% retrace is the DOW Transports.  A new high with the Industrials not confirming is a direct bearish development under DOW theory. I respect the hell out of DOW theory and the fact that we didn't yet get any kind of major non-confirmation bothers me regardless of whatever Richard Russell says.  We can only hope the transports squeaks a new high and the Industrials does not.

However we count things, keep an eye on the RUT squiggles. Its due a wave (v) and the measurements project to perhaps a new RUT high above 649.15.  

P2 has retraced sufficiently in both time and price.  The only reason for new highs is four things: 1) to make a bearish DOW theory non-confirmation   2) some subindexes may not have finished their ABC moves.  3) To confuse the hell out of everyone and wash out the excess bearishness even when it drops again  4) To divide the EW camp into bulls/bears over the intermediate term. Right now pretty much everyone is/was bearish, but some new highs in some things will likely change some outlooks.

No I do not think this is quite going to be like the 2007 new high after a big fakeout downward.  SPX 1150 and DJIA tops in January should hold just fine.  Not sure about the NASDAQ.  1128 is big resistance and the DOW minis I painted this morning shows an inverted H&S target of around 10500 (or 10480) which is also big resistance.

Now that I said that, lets see what happens. 

Its going to turn down in a big way, thats the primary count, it hasn't changed. And a wave 3 of some degree that will TAKE OUT 1044.

They changed the short rules a few days ago. Don't you just think the market cannot wait to test how that turns out?  It never fails when they change the rules to "promote" an "up" market, the opposite will happen soon enough. Yes, I realize everyone and their brother probably has thought the same thing, but that only changes the timing, not the ultimate moves.

The 13/34 crossed it should fakeout for a day or so.

[Update 6:20 PM: IYR looks toppy with negative divergence on the hourly. JNK was red all day. Things are not what they seem. 

I read a story today where they are already making excuses for any lower unemployment due out this week. Just remember this is all a game to the market movers and they need another pump or 2 to dump their stocks. Always managing expectations. Lovely. In the end its all BS]
McClellan's is showing negative divergence]

[Update 5:35 PM: Since the RUT seems to be on a mission (make a new high above 649.15), the squiggle count is important here.  It also makes a nice squiggle count so far.]

Today's move up had the technical wave signature of a 5th wave and likely the topping-type sentiment to go along with it. Not to say that it is over. For now I converted this 5 wave move looking structure to an expanded flat on the Wilshire. The SPX still couldn't close that gap to 1116.48 and the DJIA has yet to take out the high from 2 weeks ago. To keep things in perspective here is the Wilshire5000 and the subsequent up volume ratio patterns since March 2009:  The conclusion: Running out of steam. Everyone is going "All in".
Both the RUT and NASDAQ had a differing look from the November lows.  The SPX, DOW and even the Wilshire had a distinctive sideways "B" area. The RUT didn't have this so much. So perhaps the RUT makes a new squeaker high to fulfill its final ABC pattern.   It would have to do so in a hurry, it sure looks extended.  Its possible the NASDAQ follows to a squeaker high but it certainly doesn't have to be.  Also it would be fitting if the transports made a new high and the Industrials did not.
Time-wise the market has more than traced in ample time for a P2 top for the SPX and DJIA in January when it did.  Perhaps some secondary indexes are finishing up and will produce non-confirmations.  Personally I think the RUT leading and being "bullish" for stocks is a big crock of crap that Wall Street has fed everyone.

Any new index tops will of course divide the EW chartists into more bullish and bearish long-count camps. That would be appropriate and I hope we get some new index highs. There are too many on the bear side of the counts.  The higher this sucker goes the harder it falls.
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