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Monday, June 14, 2010

Elliott Wave Update ~ 14 June [Update 6:47PM]

[Update 6:47PM: There are about 5 key charts I am watching like a hawk here.  One is the dollar chart I shown earlier. These are the next four:

Cumulative advancers:
Moved up today despite the flat day.  And it makes remarkable little waves. I wish I had paid more attention to it on P2. Live and learn.
$BPSPX can sometimes be a very useful chart. This is one of those times I believe.  Not only notice the remarkable little waves but the similarities to the Minor 1 down in 2007 and the same levels.

This chart also moved higher today despite the red/flat day.

Look at the RSI line.  See whenever it breaks from oversold back above the 30 line which it did today? Look at the minimum movement. It should at least head to the 50 line or more probably likely higher before Minor 2 is over. At least that is what history suggests. This works even in the most bearish wave corrections as you can see in 2008.

Thats why I like this as a stand-alone sentiment indicator. It kind of shows how each wave, if counted correctly, will produce a measurable swing in sentiment prior before the next wave can occur.
McClellan's Oscillator or the NYMO. Looking for possible negative divergences but that doesn't have to be the case. So far none. In fact it moved up 7 points today.  Looking for a 60+ reading perhaps also.
The last chart to watch is the VIX. I have a blue box target. Notice it hasn't even backtested its 50 or 200 MA's yet.  It has a partially filled gap at the moment.  The thing to look for is a close under the BB down the road and any divergences with the SPX prices or positive divergences in its indicators such as ROC. At the moment the ROC has a tiny positive divergence and it might rally the next few days. ]
[Update 5:54PM:  Sometimes a simple example explains easily on how a structure can be.  I see there is a lot of doubt on the leading diagonal count. That is actually good and I won't argue it too much anymore. Its not that important.

But here is an example of one such LD in the SPX. Yes this one is more a nice falling wedge and has no truncation but is remarkably similar in that this was a Minor wave 1 (off a major top no less) that took 30 trading days (the current LD took 31 I think).  It has a sharp [a][b][c] but that was probably due to the extreme falling wedge.  

Also note that it shows my wave two theories that one close over the bear candle that can occur, then attempt to make higher high the next day, then splat. We actually seen that work on the flash crash candle in which the market had one close over it, attempt higher the next day, then splat. 

So if the current market count of Minor 2 is correct, we might see one close over 1115, next day attempt to move higher (maybe all the way to 1130) and then splat! By then a good bit of bears will again capitulate to the counter trend and enough bullishness will be present to allow the market to move to Minor 3 lower. 

Thats about the gist of it.

Again 1068-1072 seems a key area to hold for this to play out.


[Update 4:55PM: The dollar fell below the (e) of [iv] of 5 which indicates that the post-trinagle thrust up move should be over and the dollar is now in a new corrective structure. The primary count has that corrective structure as Intermediate (2).  Technicals seem to point to that also. The ROC just slipped below the zero line and you can see the negative divergence on the RSI and confirmed by a messy MACD signal line. Ultimate Oscillator also shows the divergence.

But the key was sentiment is/was just sky high on the dollar (and bearish on the Euro). That needs to wash out a bit and the only thing that will wash it out is a price decline.]

After bottoming around 1042 recently, the market has managed to rally some 64 points back to the 200DMA practically.   This would make a perfectly fine [a] wave of Minor 2.

We then would need a [b] wave that holds support most preferably above 1068 - 1072.  Usually B waves only retrace 38-50% typically.  But since the [a] wave was sharp and has a wedge shape, and due to the extreme bull/bear tug of war, perhaps an initial sharp [b] price decline is in store.  You can call it an [x] wave if your count prefers also. It all means the same: After a 64 point rally, it may need a pause and a consolidation (the [b] wave) to breach into the upper gap at 1107-1115 and a move above the 200DMA which has now failed 3 times. Is it allowed a fourth try?

The top bearish alternate is that a subwave Minute [ii] 3-3-5 flat of Minor 3 wave has just played out and things will collapse to the downside or will so after one more quick attempt to get into the 1107-1115 gap.  A failure to hold 1068-1072 is very bearish.  However technicals still solidly, as of the close, point toward [a] of Minor 2.

The bull flag target was smartly met.  I suspect [a] of Minor 2 is over. The daily shooting star candle should hold for at least a day or so.
Again, if this is Minor wave 2 still, it has unfortunately a wide-ranging target box for now. It should narrow a bit as thing reveal themselves.
Assuming some kind of proper right shoulder comes into play.
Down move looks like a backtest of the downsloping red trendline for now. The last red hourly volume candle is higher of course to downside but the total isn't as bad as some other recent days of 5/26 through 6/9 as you can see.
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