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Thursday, May 6, 2010

Elliott Wave Update ~ 6 May [Update 8:30 PM]

[Update 9:08 PM: Anatomy of a plunge from the eyes of a merciless Skynet.   I kind of envisioned it happening way back here. http://3.bp.blogspot.com/_TwUS3GyHKsQ/S5KrMiKMP2I/AAAAAAAAESQ/amN3ENfLnUk/s1600-h/spx.png  After that 13:1 up day, the market went on to rally way more but did not forget where it had come from. Why does anyone think if the market sinks to lower levels there will not be a repeat(s)during the time for the appropriate wave 3's no matter what degree?


[Update 8:30PM: http://money.cnn.com/2010/05/06/markets/markets_newyork/index.htm  Cancelling trades. "fatfingers" LOL. Yeah expect a lot more lies as P3 unfolds.

Do you think that maybe there were no bids today because a) no more cash to deploy (mutual fund cash levels are near all-time record lows  b) Continued depletion of stock mutual funds by mom and pop investers.  c) "profit taking" on a massive scale considering the market has rallied some 80% in only 13 months with P/E's on some stocks at over 100.  d) A shitload of stops set all up and down at the gaps on the steady rise from the 1044 low?  e)  Insiders still selling way more than buying.

f) And oh yeah... Skynet. http://www.zerohedge.com/article/day-market-almost-died-courtesy-high-frequency-trading

And the economy is headed to double dip mode at the least http://www.consumerindexes.com/ April retail numbers today SUCKED and I knew they would cause this site tracks daily consumer info and shows the current status of the consumer. And its not bullish.

LOL. Social mood swings to extreme negativity cannot be "cancelled".

Oh expect a lot more PPT shenanigans but in the end, the market will surely go where it will go. Whether or not they let the little guy to profit from it is another story.

Thats why I always said the safest bet is a direct short on a big fat, overbloated stock with a "short and hold" mentality. I figure thats what they did in 1929, going back to basics should work here too.

There is no telling exactly how this initial plunge rebound? will play out tomorrow. Futures are a bit active at this time of the day.    One thing is that more resistance has hunkered down overhead of the market.

[Update 7:57PM: Yet another update on the DJIA losing the Supercycle upper channel line. (Background in this post: http://danericselliottwaves.blogspot.com/2010/04/weekend-charts-and-stuff.html Also lost the rising lower trendline in very bearish looking craggly up wedge bear rally (P2) the same day. Is it any wonder it plunged? Not to me.

There has been no talking heads mentioning "retesting March 2009 lows" for quite some time now. Still none. Thats bullish sentiment which is bearish for stocks.
[Update 7:29 PM:  Hawking the EWI thing: Elliott Wave International is having "Free Week" next week and kicked it off early by giving the latest EW Theorist in April by Robert Prechter. Well worth the read sign up for Club EWI through the link to the left.  When you become a EWI Club Member (free) any services you select nets me a small commission.]

[Update 7:06PM: They will of course try to "jawbone" the markets back up. The best thing they can do is nothing probably. The more jawboning, the more it will probe. The market probed a great soft spot and drove right through it. Do not think it will magically not continue to probe until it finds some solid granite support.

The great intra-day plunge occurred just as the SPX and DJIA broke their long P2 lower trend/channel lines. The big bounce could be just the obligatory backtest.

One thing EWI always says to help confirm P3 is that market internals should be more extreme than anything in P1. As I was watching the tape today explode downward, I was watching this very chart of internal down and decliners. The decliners reached I believe 36:1 down and down volume ratio peaked at 93.57 on the 1 minute scale. A snapshot in time, it dwarfed the P1 worst 1 day candles by far.

EWI mentioned the gap down day a few days ago was a 90% down day. This day was no doubt also a 90% down day. These near back to back 90% down with a near 90% down sandwiched between does not seem to be in the realm of a bull market "correction".  It is solid evidence of P3 and already setting extremes.
The real question is if this is P3, can we expect an Intermediate wave (1) to be not a lazy decline but a decline on the scale of the heart of the "third of a third" of P1? Will Intermediate (1) go like gangbusters to sub 900 SPX  like wave 3 of (3) in P1 after a loss of the lower channel lines?

Again, this chart shows that the last 9 days has played similar to like the 2008 breakdown, will the rest of Intermediate (1) do the same? http://2.bp.blogspot.com/_TwUS3GyHKsQ/S-Mn53XdYCI/AAAAAAAAFHk/reBbWGemlzY/s1600/wilshire+weekly.png If so, we will be sub-900 SPX in no time at all.


[Update 6:39PM: DJIA shows that today's bounce may just be a huge backtest of the channel that it dropped out of.

Here is a reminder of a reasonable Primary wave 3 projection. I have shown this before. This is posted on my Stockcharts page.]

Pundits telling themselves the "computers glitched" is a bullish mindset.

The best we can do now is mark out channels using base, acceleration etc, and make the blue box areas, throw some wave labels up there and see what happens... Ironically the market is not even oversold in RSI on the dailys. SPX ended at 33.37 RSI.
The Wilshire 5000 had one day close over "Lehman Day" http://danericselliottwaves.blogspot.com/2010/04/battle-of-lehman-day.html and has now broken lower in much the same manner as it did in 2008. Glitch?  Was it a glitch then too?
I'll have more later.
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