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Tuesday, March 23, 2010

Elliott Wave Update ~ 23 March [Update 10:10PM]

[Update 10:10PM: This SPX chart shows the squiggle possibilities.  I propose that the market is in a big Minor B wave expanded flat and that the [b] is almost peaked.  If for no other reason, the inverted H&S target is met at 1178. This is also where (c) = (a) and the squiggles look good in that regard.  It also would make sense if the market gets slapped down here once last shot (too much bullishness) and slightly falling back under 1150 intraday after a 2-3 day selloff.  Bullishness is certainly high in  any number of things you care to look at.  There is almost a certain arrogance being displayed.]

The expanded flat makes sense here as a B wave. It allows a "correction" to occur in prices that actually makes a new high (it did today) and the [c] wave sell-off would allow bullish sentiment to bleed off a bit yet the market maintain the 1150 breakout spot.  As long as the market doesn't close beneath 1150, it can certainly dip below.  So even a 30 point SPX drop can be very bearish yet the market will sustain the 1150 breakout.  The market takes care of  short-term excessive bullishness yet maintains the 1150 breakout (as long as it closes above it).  Anyways thats my thinking  here. Then if a C wave of (Z) launches, the market will be in its final strides for the last intermediate ZZ. How high that can go the market will decide but a Fibonacci relationship to A is seems likely.]

This sentiment gauge chart is about the highest on the NASDAQ since 2007.

We can know if this pattern is correct or not. Obviously a big move up tomorrow and then sideways could mean a wave  (iii) and then (iv) and its not a ZZ up from 1152 as I propose here and that means some other impulse pattern is playing out. However this is a particular ZZ pattern that looks very familiar to me.  A decent reversal should happen soon after peaking if my squiggles are correct.]

[Update 8:43PM: Interesting poll in which a whopping 79% of Americans think the economy could "collapse".
The term "collapse" is a P3-type term. It is a term I associate with the realization that once a Ponzi scheme is fully recognized for what it is, there is no "upside surprise".  In other words, you can be bearish 100% and still your going to pull out of the Ponzi as fast as you can.  There is no wonder why people feel this way. Debt is out of control. The term "trillion" now gets tossed around like a bean bag. People are aware of the danger of out-of-control debt.

Its amazing that even after 12+ months of market rally and a massive social mood rebound (VIX almost under 16 folks!) they realize that things are still the suck and we are living an illusion.

No family likes debt hanging over their heads and now they don't like debt hanging over their governments heads (and many now have both to worry about). They now are starting to feel that loaded gun of government debt pointed directly at them....for surely they will be taxed.  Let me ask you this? Is economic activity going to pick up? Is social mood going to go positive and be economically fruitful under these conditions of debt overhang and threat of government ruling and interfering over every aspect of your life?

Now the real question is when do they associate the danger of debt with the marketplace?  When do they recognize that the banks are playing Ponzi fire with the financial markets? So far that hasn't yet happened.  Too busy with "earnings" and P/E ratios and 5.8% GDP growth numbers (which are bull also because we borrowed all of it) and economists telling us everything will be alright (yet ignoring the debt!).

When does social mood say "enough!" and begin to pull what they have left so as to keep the government from getting the rest of it?  Health care signing was the "proof" that government is capable of reaching deep.

The people will soon come to realize that nothing is off limits. And thus hunker down even more and cash out while you can. And social mood is nowhere near the bottom in my opinion.

We haven't yet begun to riot.

P3 is no mythical unicorn! It exists in the waking conscious of almost every American.  They haven't yet fully acted upon it yet, but the time is coming.

[Update 4:16 PM: Some supporting evidence that this is a Minute [b] wave of Minor B is that not all indexes registered a new high. The transports seem to be tracing ABC's and didn't confirm the "breakout". I really have a feeling the market is getting ready to be slapped down for a few percent loss.]

I'll stick with the SPX count I showed last night

I have the move up from yesterday's opening low as a Minute [b] wave (a)(b)(c) formation zigzag.  This implies a huge down move is coming in a [c] wave of Minor B back to under 1150.  This should be a very bearish sell-off.

The inverted H&S target from the February low is 1178 for the SPX. So tomorrow we could see some early jostling at an attempt to take prices higher. But if this overall count is correct, a big sell Minute [c] should be coming. Overall the count feels right at the moment.  The intraday squiggles of the last 2 days look like "threes" as shown in the Wilshire count above.
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