Custom Search

Thursday, April 29, 2010

Elliott Wave Update ~ 29 April [Update 8:45PM]

[Update 8:45PM: Although the DOW did not make a new high today, the Price and Volume Trend indicator is setting itself up for yet another negative divergence. In fact you can probably interpolate that it is diverging again already.
You can see the entire rally that this is the first time this diverging behavior is rearing its ugly head.

[Update 8:27PM: Still always looking for the (E) wave of a massive primary-sized [B] wave triangle playing out for XOM. So far we may have only seen the top of A of (E).  One thing that gives a strong leg of validity to this pattern is that the (D) wave is exactly, to the penny, a Fibonnnaci .618 times the length of wave (B).

Quote Elliott Wave Principle (Prechter) page 139 on contracting triangles: " We have found that at least two of the alternate waves are typically related to each other by .618. I.e., in a contracting triangle, wave e = .618 times wave c or wave d = .618 times wave b."

The math:  Price length of (B) = $20.85  Price length of (D) = $12.89        $20.85 x .618 = $12.8852

That is indeed the case here with (D) = .618(B) to the very penny after a year's length of time has gone on with the waves!

At any rate, I figure that C of (E) will close the gap down finally above $70.  Usually (E) waves break over the (A) - (C) barrier trendline in a false break upwards.   Another aspect that makes this a nice triangle is that usually one interior wave is a complex pattern and that is usually the (C) wave which is the case here.

However e waves can be tricky and can (and usually does) turn when it can catch the most off guard that it is able.   So in that regard, the (E) wave has probably already formed a sufficient price length and time length. The last confirmation is the requirement that it be a zigzag in form. That is hard to tell on this weekly.

Why is XOM such a good candidate for waves and why is it important? 1) It holds a big weighting (#1 market cap) in the SPX  2) It is widely held by institutions and pretty impossible to manipulate.

[Update 5:23 PM: IYR made a new recovery high. I don't have a count for it but the pattern makes for a nice overlapping wedge. Gap up today. RSI on this hourly shows negative divergence.]

Market retraced to the 62% Fib back up from the yesterday's low and slightly beyond that Fib marker.  This is not unusual.  However the SPX closed above 1205 which is probably bullish for the algo's.  Nasdaq and RUT caught a serious bid by midday.  It would still all make for a nice wave (ii) but prices must head down fairly soon for the ideal wave structure. But topping processes are probably never that "neat" and I feel we are in a topping process. To have some intra-index divergences would be actually ideal.

Other than the first few minutes of the open, the Wilshire and SPX didn't look particularly impulsive. Even the opening bum rush from yesterday afternoon's dip lacks any kind of micro up/down impulse moves.

We do have a possible squiggle count for the bearish wave (ii).
The market internals were nothing to write home about.  Certainly the up volume ratio and advancers were less than the when the market was running up a week ago. And now there is yet again another unclosed gap up and total volume contracted. For such so-so market internals, its got to make an overnight bull nervous particularly since the "Greek" thing and contagion just seems to be warming up and is nowhere near resolved.

That is how wave two's resolve to be wave two's.  The trend blinks somewhere on the retrace to the high (usually on waning market internals) and the market decides its had enough and sells hard in a wave three. Where that blink occurs is an educated guess because yes, it can retrace deeply particularly for a very small wave. I did one quick study of P1 and found Minute waves averaged over a 72% retrace. However 78.6% Fib is about the max it should go. So far the Wilshire has retraced 68.6% so we are running out of room. Yet we do have room still.

The ROC is limping too and just barely crossed the zero line again. And check out the negative RSI divergence and impending weakness.  Yes the market has been rolling those over as of late, but this one looks like a good indication at this moment in showing weakness.
Well, EWI (and many others) suggested that the big sideways move of the past week or so was a wave four expanded flat of some kind. It doesn't work for my SPX and Wilshire count so much but it certainly works for my DJIA count: It need only squeak to a new high. However I drew wave [v] up to a more "perfect" wave manner which targets the inverted H&S target area of around 11380-11400 at least.

I am throwing this count out there for info in case it works. We'll see how it works out.
All in all, I am not too worried about the waves at this second because the topping processes are probably messy affairs. We're just going to have to go with what we can count. If the DOW makes a new high, then we have a solid wave pattern to account for it and we'll follow that for a bit to see what transpires.
blog comments powered by Disqus