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Wednesday, March 17, 2010

Elliott Wave Update ~ 17 March [Update 8:55PM]

[Update 9:35PM: Ok some people had valid concerns with the placement of the Minute [i].  I agree after looking at it, maybe I had it in the wrong spot. (its not too important at this stage) Here it is as a leading diagonal for Minute [i] which works better. The  (iii) of [i] looks like an ABC up but really even in EWP, the jury is out on strict definition. It works here I'd say because the whole effort down there was of a leading diagonal price action. Relentless advancement, deep retrace and then breakout. It fits.

Some also suppose this rally from Feb low may be a B wave. I doubt that because every index has confirmed a new high and it has been a very broad based rally. With a B wave you'd expect something to non-confirm. That hasn't been the case. 
[Update: 8:55PM: I would show something technically weak for the long term, but the truth is it is all fairly bullish looking for the longer term.  And that is fine if we suppose that the market is in some kind of cycle wave rally.  After over 1 year of primary wave, people are reverting to cycle wave TA and making cycle wave assumptions and counts! 

So can technicals be expected to "rollover" as much as they did at the 2007 cycle wave high?  You think this market is going to warn nice and easy like of an impending rollover necessarily? I think not.  Did technicals spell trouble for the 1987 crash? No, technicals could not predict such an event, only EW theory could and did.

People are now chasing the bullish technicals which is fine. Specifically pointing out cycle wave technicals because thats what 2003 -2007 was. I cannot.  I must stick to the theory that we are experiencing a primary wave rally.  The rally is sharp, and technicals may very well not warn of an impending massive drop. There is one chart though still looking technically weak if you ask me and its on a  global scale. The GDOW.

What will help enable a bullish state of mind during the next downturn? I have several answers:
1. Bullish DOW theory.
2. Bullish long term technicals (and everyone supposing we are in another cycle wave thus making a lot of comparisons that are false choices)
3. And "discrediting" of EW theory for good near a primary wave high.
4. A "look" of 5 waves up from the low.
5. "Improving" fundamentals (lies on TV and in print)

These things I have pondered much during P2 rally and at a few times have mentioned from time to time that these developments will help allow a historic Primary wave 3 down to unfold. And now I cannot believe they are all coming to pass in spite of evidence of massive fraud and ponzis rampant in the markets.

Now technicals are back in heavy vogue and worshipped above all else near the top of another primary wave. It is predictable and troublesome if you are just going back into "cycle wave TA style". Now is when I could give a rat's ass about TA, particularly cycle wave TA. Because I still believe we are not in a cycle wave.  Waves trump TA. The big one is coming.

When cycle wave TA is now back in vogue and everyone is on the TA bandwagon, that is a warning sign. 

The 38:1 down day of recent is just a warning shot.

Take a look at this GDOW weekly chart. Not in an expanded flat, its high occurred in 2007.  Thats a clear 5 waves down from peak and its best to label that down move as a primary wave. Now how long will primary [2] or even a [B] last? It won't be of cycle length. Why? Because there is no corrective pattern that has 5 waves down for a cycle wave.  So that means this rally cannot be of cycle wave length. This EW chart alone RULES OUT A CYCLE WAVE REBOUND.  You can see actually negative divergence on the RSI. Certainly it could be rolling over on this chart. The ROC is actually very close to the zero line on this chart.
And the GDOW inverted H&S target has been met. Can it go higher? Sure. But for all the rallying over the last 6 weeks, it hasn't even taken out its high.  
[Update 7:11 PM: Here is the DJIA squiggle count to go along with the previous chart.  Again, its a proposed extended 5th wave. How about DOW 10777 as a high?]
[Update 6:25PM: I think this DJIA count is rather nice. Is follows a great deal of guidelines including my blue box for finding the middle of a wave 3. Feedback appreciated.]
DJIA new closing high today and intraday high. Bullish for DOW theory.  Richard Russell is now back on board the bull.

Squiggles could be one more squiggly wave up. But everytime I suggest that "one more squiggle" it usually doesn't.
Wilshire weekly's RSI is back to a long-running downtrend line. Also it has reached the blue arrow resistance marks.
RSI trendlines have all been just a rocket ship straight up on the dailys. The COMP's RSI is at 76.28. You have to go back some 5 years to see that reading. Here are some other daily closes:
RUT - 77.6
IYR - 81.74
SPX - 75.33
Transports - 78.2
Wilshire - 76.95
$DJUSFN - 76.81
Well you get the idea.  Overbought? Yup. When the RSI trendlines break, and it won't take much to do that, this market could sell off very hard indeed.
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