Custom Search

Friday, May 21, 2010

Elliott Wave Update ~ 21 May [Update 8:36PM]

[Update 8:36PM: A look at the weekly in a simplified way. I really don't see what the bulls are hanging their hats on here other than hope.]
[Update 7PM:  A detailed look at the squiggles reveals a zigzag up off the low.  Notice the fakeout wave four triangle which rendered the rise from low to high a simple zigzag.   To reinforce this view [C] practically = [A] 
[Update 5:25 PM: This next chart is an instructive lesson on how to apply EW theory.   As much as I'd like to call the move from 1173 to 1055 a big impulse wave, I am having problems doing that.   As it stands now, objectively it counts best as only seven waves down. Seven is a corrective pattern. We need at least nine.

The Fib ratios and structure is pretty outstanding so far as you can see. Just need that new low to call it a done deal. 

You can see my "blue box" area that I marked as the "virgin zone" and in general, no price retrace should enter this area until a wave [ii].  In fact the wave (iv) should be, in principle, lower than the previous subwave iv. So the market pretty much needs to head down first thing and make a new low before up.

Also it is still contained in a channel. A break up into the virgin zone and out of the channel is a bullish development in general although there is no hard rule on that. But experience would tell me something is up.

So there is not much ambiguity here. We have a clear pattern that will resolve one way or another. 

The thing that gives me confidence in the bear case is that the move up from 1055 to today's intraday peak is clearly a zigzag up which is a corrective up pattern. 
I suspected the end of day would pop. Thats why I posted this triangle at 3PM  This up day helps reset some bearish indicators and such.

As nice as the wave structure counts, it really would be much cleaner if it achieved a new low come early next week.
Its hard to read too much into today's ending being its OPEX Friday.  Someone spent a lot of money squeezing the tape at the end of day.  

Intraday we have solid evidence that the hard 35 SPX bounce from 1055 to 1090 was a simple zigzag which is corrective up. This is important evidence for the moment. Whether of not its part of a larger triangle we'll see come Monday. 1095 is the key.

Everything counts well enough as a triangle complete with one leg being complex (the d wave).  The e broke over the a-c line which is when people get convinced that a new trend (in this case up) is starting.  A hard reversal thrust down will dispel that (if it happens come Monday)

If Monday again opens deep red, it would be appropriate as there is not much room left for the triangle count.

One other thing: Look at the indicators I have below and see how rapidly money was flowing in and out of the market. The day was as much as 10:1 up ratio volume and as low as 1:1 or at the open extremely low. 

The day ended at 9.27 Up volume ratio yet much more weak 3.15: 1 up ratio advancers. That doesn't smack of a particularly healthy reversal that will carry prices higher just yet. But it will serve the purpose of taking some of the extreme oversold out of the market and have people going into the weekend feeling ok about things instead of doom.
Again a new low under today's 1055 next week would be the primary count.

And its just like the market to leave the end of week dangling so everyone can ponder it all on the weekend. I expected nothing less.
blog comments powered by Disqus