Custom Search

Tuesday, May 11, 2010

Elliott Wave Update ~ 11 May [Update 8:16PM]

[Update 8:16PM: Gold seems to be heading to the inverted H&S target of 1251.]
Monthly Gold has an inverted H&S target of 1300 or so. So between 1251 - 1300 seems like a good peak.

The Dow has retraced 72%.  Anything more is quite deep.  Indecision candle today on a longish doji. Backtesting the 10 and 50 DMA and the 13,34 EMA's.  Rallied to the top and a hair over the long May 6th crash candle. Still rather large price swings intraday. Lesser total volume today.

The NYMO strengthened to -53 from -64 today despite the end of day in the red.  I would prefer a wave 3 start nearer zero or neutral but again this is not a rule just a gut feeling based on what has happened in P1.

All things considering, if Europe is in a wave 2, one would like for the retrace to be a bit deeper and take longer in time as a guideline.  However per the alternates on this FTSE100 chart below, perhaps wave 1 is not even over yet and will end truncated. If this was the case that would probably mean the US markets would downdraft and close the 11 point gap or find support somewhere in it.
So today moved up as expected (after a quick head-fake down this morning) and the entire move counts best as a zigzag (or even a double ZZ).  So that implies either wave 2 is over or the peak of [a] or [w] has occurred and a down move will be an [b] or [x] in a flat or a double ZZ.  Certainly wave 2 has retraced more than ample enough in price. However time-wise is fairly short. And you'd think after a historic 1 day collapse, it will need some time before it does a wave 3 of some degree.  

[Update- In retrospect, the Sep 2008 short covering rally covered hundred+ of points  in a mere few hours. The market then proceeded to selloff yet again.]

So in review using the logic of wave theory combined with TA, what we have as a primary count is that the market is experiencing a wave 2 retrace.  The retrace is ample enough in price (DJIA retrace 72%) and has traced an adequate wave pattern (zizgag).  If it requires more time, than it will need to produce a pattern that runs out sideways in some fashion like a flat.  But a flat pattern would be very bearish as that implies a great price move back under 1085 SPX then a move back up to 1160+ area.  Thats a big move just prior to yet another big move (wave 3).

Since the giant flat pattern seems more remote, there is only one other option for this wave 2 in my estimation: A double ZZ.  But double ZZ's occur usually because the market requires a higher price, not necessarily more time.

So the jury is out on a lot of things right now. But the wave count shows that Minor 3 down could be headed our way. And one must take this threat of a market selloff potential seriously.

So as you can see, there appears there might be some disconnect between Europe's markets and the US. What this exactly means no one can be sure at the moment. I'll leave it at that.
blog comments powered by Disqus