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Wednesday, May 26, 2010

Elliott Wave Update ~ 26 May [Update 5:20PM]

[Update 5:20PM: As we ponder the market's next squiggle moves, the bigger picture is certainly bearish.  Using the Wilshire 5000, we see that it has today back-tested its 200DMA and then fell away rather bearishly in what could be a shooting star candle if we get confirmation and follow through. Its 200 DMA is at serious horizontal resistance.

As a bonus, by creating a "blue box" virgin area using daily candles, the Wilshire hit inside that target box.

So all in all, advantage bears on the day for sure.

[Update 5:05PM:  As Kenny pointed out, the e-minis paints a slightly differing wave picture than the SPX cash index. Its arguably a decent 5 waves up from the low which suggests we need another 5 to complete a 5-3-5 zigzag.  The SPX probably counts better as a "three" up. Perhaps this is just a (b) wave pullback to backtest the down channel upper line.

Also note that it may try and form an inverse H&S pattern so the bulls have something to chomp on technically.

No use in fretting about things.  We'll find out soon enough, maybe even by morning.

We cannot forget that the primary count has the next wave down as a potential barnstorming [iii] of 3 of (1) of P[3] which should be a quite a bit of panic involved.   The rally from 1040 reached a 50 point rebound in a three wave structure, which in the context of a potential power wave down, is pretty healthy considering the worst of a Minor wave 3 has yet to come.

So the 5 waves down from 1173 to 1040 has retraced a full Fib 38%. Usually a wave two reaches a bit higher so we cannot be sure if it is over or if the afternoon selling is just the (b) wave pullback of an (a)(b)(c) zigzag higher than today's high.

However technically the last hour down volume candle on the e-minis painted a bearish picture and arguably a big 5 wave move lower.  And on the cash SPX index we can count 3 waves from 1040 to 1090.  (Plus 50 points is one hellavu bounce at this stage)

So we'll mark the top of today's rally as Minute [ii] and we'll have to see what the market decides.

I would not be overly surprised if the market manages to squeak out another small rally leg to my blue box area just above 1090. Yet the primary count is tugging at the market in a powerful wave 3 at several degrees of trend.
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