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Tuesday, June 15, 2010

Elliott Wave Update ~ 15 June [Update 8:55PM]

[Update 8:55PM: Haven't shown the DOW in a while. Its always about the DJIA when it comes down to things. Its the granddaddy. After noticing the breadth thrust 14 day event tonight  I glanced at a few other instances of breadth thrusts over the years. Each one seems to have yielded a further 250-350 points before a turn of some sort.  The one earlier this year in 2010 went for many more hundreds of points to the P2 peak

So if we can expect an [a] wave, then [b] wave pullback, the DJIA might take to the 61% Fib roughly.

The ultimate oscillator seems to have given a small buy signal. The RSI and ROC don't yet indicate Minor 2 is nearly done yet which we haven't seen a [b] wave yet so that makes sense.

[Update 5:25PM: As a bear with a bearish outlook, I like to see stories like these particularly by Kate Gibson of Marketwatch who can always can be counted on to go out and find some useless quote of the day to explain just why the market moved. Here come the easily predicted ones:

You especially like to see her bleat "Cleared 200DMA" at the top near the headline.

Here are some other gems by the "experts" she dug up...:

"...signalling growing confidence with Europe's ability to deal with its debt crisis".

"...the [S&P500] index finished above its 200 day moving average at 1107, "a clear signal that things have gotten better", said Art Hogan, Chief market strategist...."

"There are rumblings the austerity plan may work, said Doug Roberts..."

I can't stand the financial media. I don't ever watch it and only follow it online to help reinforce the counts and expected sentiment.

Primary count has Minor wave 1 ending in an contracting leading diagonal with a truncated low on the SPX at 1042.17.  One probable, nay likely, trait of a contracting diagonal triangle combined with a truncated ending is a violent move in the opposite direction. Despite the surprising strength of today's rally, it is good news in that it helps confirm the overall larger count.

In the end we know several things: 
1.  Minor wave 2 can be expected to retrace in a sharp zigzag move.  So yes, that is the case at least so far as an [a] leg.

2. Minor wave 2 has a wide retrace range from 38% - 61.8%.  So far the SPX has retraced only 41.5% of the entire decline. But being this is a Minor wave from a major top, it is more than reasonable to expect anywhere from 45 - 73%.  Yes that is a wide range, but unfortunately there is nothing we can do about it as Prechter likes to say. So we suspected a higher target anyways. I was expecting anywhere from 1126-1130. We are still not even there yet.  

The 1107-1115 gap is now closed and in fact we had a solid close over the 19:1 down candle using the Wilshire5000 which I expected to occur at least once for Minor 2.  I didn't expect it this soon however but its not up to us.  If the market can use this area as support, it can certainly move higher.  

So tomorrow is, in theory, a "squash down" day.  Maybe an early rise then a good old bear beat down for Minute [b].  Minute [b] target is at least as low as closing today's gap up at some point. 

 If it just keeps rising, well you got to figure that its going to try  and shoot way above the 1113 mark and then try and hold it as support on any sellers that come out and I would expect sellers here soon.

Everyone is probably poo-pooing themselves that the market cleared the 200DMA. Whooppee!. All Minor wave 2's from tops do I would suspect.

Turning sentiment bullish can only be accomplished with higher prices. And today helped a great deal.
So form is paramount.  We should see a clear [a][b][c] pattern and probably by just using daily candles. Perhaps an early move up tomorrow will finish [a] of 2. That is the best guess.

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