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Monday, April 12, 2010

Elliott Wave Update ~ 12 April [Update 8:32PM]

[Update 8:32PM: Keeping up with the theme of market internals and "key" days, I updated my chart from this post

What we have is the 13:1 day still stands tall as the big day of this rally off the 1044 SPX low.  The most recent day that broke above the triangle was a 6:1 up volume ratio day thats marked as number 23. Also note the total lack of distribution days since early February.

So the market is now overbought on a weekly basis which is a longer time frame.  Precariously it is still under and just now challenging the breakdown resistance zone of P1 and has yet to reach the March 2008 wave (1) price low.  It is doing this on lower volume levels and weaker internals.

Yet market sentiment is reaching extremes in many areas. The put/call ratio is striking and the VIX is showing a general complacency. Certain surveys have indeed returned to highs or near highs.  None of this tells us exactly when things will, at the least, "correct", but they do help clue us in that a near term peak is almost upon us.

Now if things play out as per my recent wave charts, it will be marked as "P2" peak as the primary count.  It will not be a popular choice even by long term bears, or even by EWI, but thats the way it counts for now. Surely the bulls will laugh out loud hard. I don't really care.

"Sense-wise" it makes perfect sense. The Wilshire will have reached its massive inverted H&S target and likely into the price range of (1) of P1 which a perfect EW pattern is wont to do.  It also will have failed to retake the breakdown resistance area of the market from 2008.  It will have been way overbought on the weekly scale.

So unless the market can produce yet another 10:1 or more up day to prove things different, the market will correct. It will peak. And the downdraft will likely be swift.

[Update 7:15PM: Taking a closer look at the inverted head and shoulder target of the Wilshire5000 and how it relates to the breakdown area of the 2008 wave down.

The market has conquered almost every terrible bear day save for one: The red candle day that dropped the market beneath the March 2008 and July 2008 lows. I marked this candle with a blue arrow.  Now this day was not the worst for down volume, but it was the second worst decliners/advancers day of P1 at 18.68.  The inverted H&S target is basically to the top of this candle.

So the "easy" work has been done, and the market, even though its a never-ending rally, has now just come up to under the breakdown area of 2008. Wave-wise, the market hasn't yet reached the Minute [ii] peak of 3 of (3) down.

If the market can reconquer the breakdown area, and hold, then the bulls will have done much to repair the massive technical damage that P1 has done. Of course in an Elliott wave pattern, a wave 2 of any size cannot reconquer this technical area of breakdown and thus a wave three commences upon failure.

Thats where we are today: A challenge of the breakdown resistance zone of P1.  

[Update 5:54PM: Wilshire5000 inverted H&S target(s). Using closing prices it target has been met. But I rather would be making the pattern using peak prices in green. That target has not been quite met. The RED line is the September 19th rally high resistance peak.  Reconquering the the long red candle day after that peak is what the market needs to do to declare a new bull.  It has now only begun to challenge it directly.

My prediction is that this candle will not be reconquered. Thats about P2 in a nutshell I suppose.
Today played out well enough to the primary wave structure I have been projecting:  Minute [iii] of C of (Z).
There has now been another blue box area created in the wave structure right where we'd expect it, in the middle of [iii] of C.  This blue box area is yet another key marker for the overall wave count.  It should not be completely retraced until the structure to C peak is completely over.
A possible squiggle count:
And here is what the SPX count would be. It implies that the market is working on the last half of C of (Z).  A Minute [iii] target ranges from 1202 to 1209'ish which it has yet to hit.
And should the market fall apart tomorrow, we have a count for that too based on an ending diagonal that Kenny presented (My overall larger count is different though)
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