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Thursday, April 1, 2010

Elliott Wave Update ~ 1 April [Update 9 PM]

[Update 9PM: Ahh, Bidu, that bane of mine. I still got my eye on you. I have it in a possible wave [iv] of 5. It needs to thrust up and break over the downtrend line come Monday.  The width of the triangle gives it a potential target of $630 which would challenge the wave 3 peak of $628.  A wave 5 should make a new high  unless its truncated. I don't yet consider $613 a truncation to $628. So at this moment we watch and see if a big thrust move is coming and at least make a new poke above $613.

 A break out under the channel and under $585 gap support is bearish. Like Apple, BIDU may be a working on a significant long term peak.
[Update 8:50PM: Crapple is making nice waves up out of the long sideways consolidation wave (4) period.  Last 4 days it has gapped up and not closed the gap until today. There is triple negative RSI divergence on this hourly. Its close to dropping out of the tight channel.

Media-wise, Apple launches the super-hyped ipad this weekend. They also announced expanding iphones to Verizon. Is not Apple the ruler of the world? Does the general media see any downside to their future? Things sure look rosy.  Marketwatch devoted the front page to them tonight.

http://www.marketwatch.com/

Yet personally, I think the market is saturated with phones and mp3's and toys and gadgets.  Believe me, I can speak to that as a consumer. Plus Apple's "wide moat" has been considerably narrowed with players such as Google nexus and of course all the ipod clones.  I think the ipad will be somewhat disappointing .  Its just a big iphone/ipod without the phone.  And you cannot put it in your pocket.

My rule of thumb is if you cannot put it in your pocket, or even your pocketbook, its got limited consumer value as far as mass selling appeal.

It sure is hyped and anything less than full hype will be just that.

We may be looking at an Apple all-time peak here.  I hesitate to say that because the counts can always extend or this may not be a correct count.

[Update 6PM: Here is the primary SPX count. Its not pretty, but corrective waves never seem to be.  There are problems but hey, what count wouldn't have problems?

I have a theory that the market traced a triple intermediate ZZ that ended in January. But it needed another ZZ because sentiment went too bearish too fast and the market is not yet ready to give it up.  So it did what it could only do and that is incorporate the third ZZ into a larger triangle corrective wave since there shouldn't be more than a triple ZZ in any corrective wave including P2.

The other nice aspect is the "E" wave in which almost everyone (me too) was sure that a new move down was coming due to bad numbers in jobs report and other economic reports at the time.  Yet it reversed hard up. So that time certainly had the "psychology" of an E wave. In short, P2 should be ending on "great news" not bad.  Tomorrow's jobs report is anticipated to be good news. In addition, lots of recent economic numbers has the "recovery story" in full bore though if you look closer, things are not as they seem.

In addition, the wave pattern from the Feb low of 1044 to the 1112 peak and then back to 1086 seems to be a "separate" structure from the current move from 1086 up.  This also seems to be separate psychologically also.  Its just my general feeling. The scraggly struggle at 1071 seems to be part of a differing structure than the current move and really does not relate necessarily.

Finally, the big intermediate triangle has an axis of 1086 which was pretty much fought around since the market first pushed toward 1080 back in September.  It makes for a nice axis and a "launch point" for the last intermediate ZZ up.

The DJIA differs slightly perhaps but the same moves are implied.

Regardless of the overall pattern, it has helped me track these last few weeks since the 13:1 up day.  As early as a few weeks back I've been generally looking for a B wave and an ascending triangle of over a 2 week duration certainly qualifies http://3.bp.blogspot.com/_TwUS3GyHKsQ/S6f3gCWZedI/AAAAAAAAEgo/nIILDkSUY6E/s1600-h/spx10.png

So in that sense, this overall count may ultimately not be the best but its helping to track things over the short term. The trendline in non-log lies right at around the magical 1200 mark. Also note that the RSI still has room to move up and still form a nice double negative divergence to help mark a top, or at least a near-term one.]


[Update 5:33 PM: The dollar chart shows five waves up. Primary count has this as an intermediate (1). EWI states that wave (2) may last a month or more due to the length of time of wave (1). However I am not so sure it requires any specific amount or minimal time. The only thing that matters is price and sentiment.

Is the move up in the dollar finished for now? It would be nice if it was. A new high in the dollar complicates the count.

A break of upper support will bring out the dollar bears again which may be needed.

I think the dollar chart is important from here on out.  The next wave up in this count is an intermediate wave (3) which should be very aggressive.  I don't think the market will ignore that as much as it was able to ignore wave (1).  An aggressive dollar move suggests that something bad is happening somewhere else: Like Euro panic or a big selling of commodities and assets (equities) in general.

So I'll be watching the dollar closely.


[Update 5PM: The Nasdaq and the RUT is a wildcard in the bunch. They seem to be waning and handing over leadership to other less risky sectors. It makes sense in that quarterly results are history so no need to "beat the SPX" with the COMP stocks at this moment.  The NASDAQ has a triangle failure as today's low was lower than the low last week. It failed to make a new high today as the DOW and SPX did.  That divergence suggests that is this move upwards in the markets has any legs left, it won't be led by the NASDAQ (or RUT).

Of course Apple is launching the i-crab this Saturday and that stock can hold the entire NDX up as its heavily weighted.

In any event, at best look for a sideways move or potential double/triple tops(s) for the NASDAQ and RUT  if the SPX and DJIA has any juice left in it next week.


[Update 4:40PM: The DOW is in a slightly differing count perhaps than that of the SPX or Wilshire5000.  It doesn't much matter at this stage because it to seems to have had a fourth wave (descending) triangle play out.  Of course triangles are suppose to indicate the final move in wave degree to come. Of course the trick is to figure out what wave degree you are in in the first place.

One interesting aspect is that this 30 minute chart shows RSI support at around 39-40 during the entire last month of trading.  If the RSI breaks this then thats a clue that the wave structure is likely "complete" for the near term.  But so far it hasn't broke.]

In yesterday's update, I warned about labeling triangles too early and that a rise may be a [d] wave peak and a hard move down may be an [e] wave that will get people rolling to the bear side only to see it reverse and break upwards again. That appears to be exactly what happened.

One leg in a triangle is supposed to be a complex wave. That wasn't really the case until the [d] wave unfolded. Usually the [c] wave is the complex wave, but if the [c] is not, then the [d] wave will fill the role. The [e] is usually a straightforward zigzag.

The very strong opening hour of over 9:1 up volume ratio created a big draft gap(s) upwards.  The market eventually tried to close the gap but it found support in the gap and reversed higher to the end of day close out.

So the primary count has this as a completed ascending triangle. There is room for a headfake [e] move come Monday lower, but the way the tape ended pointing straight up, it rather suggests a big breakout coming Monday. In addition, the move from [d] to [e] counts nicely as a 5-3-5 zigzag already which is what its supposed to be for an [e] wave.

In either case, tomorrow's futures should help set the direction come Monday. I wouldn't think the futures will try to fakeout Monday's cash index move. If Monday means to be bullish, I have a feeling Friday's futures will reflect that. If anything, a big futures move for Monday will trap a lot of shorts and squeeze helping to create a breakout needed to get the DOW over 11000 and the SPX running toward 1200.

Well if the ascending triangle is indeed going to hold and breakout on Monday, the upside target is approx 1210 SPX.  With resistance being heavy at 1200, 1210 would be a quite a feat.

1161 is the key level to the whole corrective/triangle formation. A breach of that to the downside is bearish.
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