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Tuesday, April 20, 2010

Elliott Wave Update ~ 20 April [Update 8:33PM]

[Update 9:50PM: Ok one more, here is the updated DJIA with the price volume trend (PVT) indicator still showing significant daily negative divergence. And a reminder that consumers are likely to take the economy back toward contraction by this 2nd quarter. http://www.consumerindexes.com/

The market is not priced for any kind of contraction....]

[Update 8:33PM:  I leave you tonight with a squiggle count. I enjoy making these, its like therapy.

A nice as the squiggle chart I posted last night on the 5 waves down, you'll notice I ignored the subwave mapping of wave i down and ii up. http://4.bp.blogspot.com/_TwUS3GyHKsQ/S8y3VfMsUpI/AAAAAAAAE2w/fzPf-xZMIds/s1600/wlsh1.png  That was probably a mistake.  The best I can figure is that the first wave i down was actually a correction of the previous wave up and then a truncated high occurred where I had ii marked. That means of course the entire correction down was an (a)(b)(c) rather than a 5 wave move.  Good call for those that said as much. (its why I had [iv] as the alt).

Regardless, if this structure is an ending expanding diagonal then we are looking for an (a)(b)(c) up I think rather than a 5 wave move.  This keeps in line with the proposed wave [iii] of C having a definite (a)(b)(c) look. http://1.bp.blogspot.com/_TwUS3GyHKsQ/S85JO9xJ-RI/AAAAAAAAE5A/p_XzPqu8mU0/s1600/spx10.png

So here is a squiggle count in which we may have had a (b) wave running triangle and now we are merely looking for another small subwave thrust higher to complete the P2 pattern and a new SPX high.

The triangle target is roughly 1214.53.  1214.53 would also be the spot where (c) = .618 x (a) using 1200 as a price low.  As in any squiggle pattern, buyer beware. We have some key markers in this squiggle count. Wave "e" of (b) cannot go below (c) or else the triangle is busted as I have it marked.

[Update 7:48PM: If the Wilshire experienced an intermediate (X) wave triangle, then the apex time target of a major turn is likely almost upon us.  The MACD lines do not look particularly healthy. I guess we'll see.
This triangle apex time target can be clearly seen in the 2009 lows. The NASDAQ bests illustrates this as it had the best triangle formation.

[Update 7:15PM: I still like this RUT chart if it makes a new high.  I like 730 in that case.  Again, the last wave [v] up has overlap in (iv) and (i) suggesting overall weakness and a potential big reversal to come. Also the hourly and daily would likely remain big negative divergences on the RSI and MACD.]

[Update 5:51PM: I like to look for wave structures and relationships in the VIX. I think they are more than valid and useful.  The last long term chart I posted was back here http://2.bp.blogspot.com/_TwUS3GyHKsQ/S5_vGuCOCFI/AAAAAAAAEcQ/rhsTbVDYXyk/s1600-h/vix.png The (C) wave looked too short at the time and it bothered me having a bearish bias in January.  The "bother" turned out to be justified as the VIX had another few waves to trace out.

The best I can come up with is a giant ending diagonal pattern.  I'm looking for "overthrow" and perhaps another close outside the daily BB.

The compressed VIX prices in an ED pattern is a bearish pattern in the longer run.  I expect to see a huge volatility rebound if this pattern completes. We need a new VIX low as a minimum. ED's are not supposed to "truncate".
[Update 5:23PM: No surprise Apple is thrusting up in A/H's. It appears to have completed a hasty wave [iv] triangle (complete with an (a)-(c) trendline break) over the last few days.  If this is accurate, Apple's gotta-have-Apple-stock-high could be a limited, quick affair.

Apple is one stock that I have suggested will foretell the end of P2.  This thrust up may be a final action on Apple. So might the markets. The ipad blows.
Proposed extending 5th of a 5th.

[Update 5:05PM: Well this pattern looks like an a-b-c up....If it is an ending diagonal, prices should move back down. I'm not counting on it though.

UPDATE: By the way Kenny showed this first: http://3.bp.blogspot.com/_goypolxEFd4/S834MUbSlII/AAAAAAAAE1s/LYHDE9cRYlk/s1600/Minis.png

Well the DJIA  failed to make a new high and most every index has retraced above the 78% Fib marker back up toward last week's peaks. Anything that retraces over 78% usually means that the old highs will be directly challenged (and likely taken out even if momentarily). Internals were pretty strong with the day ending with 4.4 advancers for every decliner. Up volume ratio was over 14 on the open and produced an unclosed gap up. This is not a typical wave two pattern and strength decidedly increased from yesterday's rebound.

The best we can do is track what we can and the DJIA seems to have a decent wave pattern going.

So far though, it counts as three waves back up. It lacks a new high and lacks a fifth wave. So the door is still open for the bearish count but its closing fast. Regardless even if it puts in a wave (v) the structure would seem to be "complete".

What is nice is the DJIA has painted a nice "do not retrace into" zone of the price high of wave i. Its marked that with the horizontal line. A break under this line would be bearish for the wave structure.

So the Wilshire and SPX appear ready to challenge the highs. If so, the best count would be an ending expanding diagonal of which there is not many examples to find in the entire history of the market both big degree and small. Trust me on this I looked high and low many weekends ago.

However, it might look best to look for an (a)(b)(c) move up for [v] to fit into the structure. Of course the market could fall apart and confirm a wave (iii) down after a failed challenge to the highs. Its a bit schizophrenic right now and the wave structure reflects that. The best analogy I can think of is that it was hard to count the sub700 low of 2009 also. Same happening in reverse?

This chart maps pretty much the best count options that I can come up with.
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