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Tuesday, April 27, 2010

Elliott Wave Update ~ 27 April [Update 10:07PM]

[Update 10:07PM: The Chinese market I have been tracking a triangle which looked unusually large and goofy. Assuming Stockcharts don't have any wrong price lows, the triangle is no longer a triangle as [e] violated [c] price low. That failure is, long term, bearish more so than bullish I suppose although I cannot make out any collective down impulsing since its 2009 bear rally high.

[Update 9:27PM: Here is a closer 10 minute Wilshire. I show the expanded form of the expanding trendlines. My earlier chart shows how I was looking for a wave [iv] low today to form a contracting ending diagonal triangle. That didn't materialize and the market sold very hard.

Also you can see why the "expanded flat" doesn't work on my charts at the moment. It just doesn't fit the count I have been tracking for over a month now (final ABC intermediate zigzag out of a massive triangle)

So I have no choice but to mark a P2 at the high. If the market spasms higher yet still?  I dunno, we'll figure something out.

[Update 9PM:  Is it a wave four expanded flat in the works and then to new highs? I am a little puzzled why anyone, after pointing out for weeks/months that this P2 sucker is more than ripe, would finally hesitate to say more downside is probable and suggest that not only is a wave five perhaps coming after a flat but a wave B and then another entire wave C to boot! This after the DJIA finally almost exactly marked its 61.8% Fib marker yesterday (a mere 6 points over) and the market is showing signs of strain. The selloff spikes downward remind me of the buying spikes at the sub-700 area in 2009. The market seemed to be warning then as it is now.

I am inclined to mark the 11251 top as a P2 top for many reasons some of which I outlined in recent posts. 61.8% was 11145.  But to recap, basically because it has to top out near here or it will cease to be a primary wave two.   But as I allude in yesterday's intraday DJIA chart, the inverse H&S pattern has been effectively hit (you can hang around to quibble the higher 11380 target.).

Is this a simple interpretation? Well hasn't the market, in painful retrospect, traded rather simply in that any and all dips have been bought continuously for 13 months? Hasn't all Mondays been nearly green? Are not tight trendlines bought?

Also I pointed out yesterday that the Wilshire 5000, the entire market, finally got a close over "Lehman BK Day" as explained in this post
As pointed out in that post, if the market can retake the last (and first real bear day of P1) bear day and hold it, then P2 may no longer be a wave two but become something else entirely (X wave?) So in that respect the Wilshire got its "one close" above that Sep 15th day, and now the market slapped it down under today as much as it could. Its seems entirely appropriate.

That is all of course a presumption. But a wave two confirms itself as a wave two when it fails to retake the key resistance zone of P1. After said failure, it then progresses into a wave three. If it could retake the big resistance and hold, it would likely make a run to new highs. So here we are. The market has indeed been pushing into the key resistance zone of P1 during 2010 and we arrived at the unbelievable 62% Fib of the DOW and just shy for the SPX.  Shall the market display a need to go higher?

The next chart is a simple one.  A clear EW pattern has manifested itself in the advance/decline chart of the NYSE.  But if your a technician purely, disregard the wave count and check out the clear negative divergence patterns of the RSI versus price and then check out the Ultimate Oscillator lows after this divergence begins to play out in the form of weakness in declining issues.

This chart, all by itself in all its simplicity, suggests the probabilities are for more bearish moves to be done prior to the "next wave up", if indeed there are new highs to be had. In that regard, for one to presume that an expanded flat is playing out should at least expect that at the end of that pattern it should somehow "square" with the indicators on this chart.  Being that its the most negative divergence so far and has not followed through to a minimum target, there is likely more selling to be done this week.

Nice bear day that seems to have "broken" the relentless uptrend since February. At least for starters. The market experienced a 17.63 ratio volume down day and decliners were solidly 5.2 bearish across the board. Closes under the 11000 level in the DJIA and the everything closed under its 10/20 DMA's pretty much which they hadn't done in like forever.

Using my candle map of the up move, the market landed at the top of support candle number #23. This is an important candle for the market in these upper ranges as this was the triangle "breakout" day for the markets.  There is an open gap created by that up day.  So needless to say, the market needs to close under that gap to confirm an even larger bearish trend change.
The overall count? I was looking for some down action today to complete wave [iv] of a possible ending contracting diagonal. That of course assumed there was one more push into the 1220's. But that pattern is pretty much shot from a wave standpoint.  What works? The expanding ending diagonal that I have been tracking the last week or so.

We can put this back up for now and see what happens.  It has a nice symmetry to it.  The down pattern looks nicely impulsive on this chart. Also the time and price ratios between A-B-C are solid. Again, ending diagonals suggest a violent price move in the opposite direction. So far that is indeed the case. So in that respect, its looking decent. Also the price should fall below the "start" of the ending diagonal move. So that would take it under the triangle breakout. But we need a close under that key horizontal support line and then under [e] of B (where the gap is on the SPX).
Looking at the Wilshire daily, the apex works out near perfectly on marking time aspects.  Also the price targets work out nicely for the breakout was just about equal the width of the triangle. Also C almost = A.

The ROC finally slipped below the zero line on this daily chart indicating a trend change. As I had been saying, the stochs didn't look particularly healthy and the ROC was waning as time went on.
Here is a quick squiggle count on the SPX.  Its a decent 5 wave move for now. It might just be getting warmed up in a 1-2, 1-2 fashion, but for now give the bull the benefit of the doubt and we'll assume a wave (ii) bounce up is coming. Target box is set.
So hey, we finally got a nasty down day. Thats what I've been saying is that it would likely happen quick not to allow anyone on board that wasn't already on board. The end of day selling is bearish and likely surprised some people as the market had been recovering any and all selling after initial daily lows had been set early. Not today.

March to new highs? Yawn.  Wouldn't be a surprise to most if that happened. It would be a surprise if it didn't happen though.

But for now, the tape is painting a bearish picture overall when looking at the wave structure, the extent of the rally, and supreme bullishness in place.

Finally you can see this DJIA prohet chart and the "Price and Volume Trend" indicator. There was a double negative divergence and today's healthy down volume drove the indicator down a good bit.
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