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Tuesday, July 20, 2010

Elliott Wave Update ~ 20 July [Update 7:45 PM]

[Update 7:45PM: Here is an interesting chart and it seems like a "duh" kind of chart but still it needs to be said.  I assembled three "fear-type" indicators, the CPC, VIX and TED, and matched them up to the SPX. Each had topped in fear some weeks or month+ ago at slightly differing spots in the wave structure. One had a new recovery ABC low (CPC) and the other two are getting close to a new recovery low but have yet to complete an ABC pattern, (VIX actually works better as a double Zigzag pattern).

Each are in a downtrend yet the remarkable thing is that the market seems to be also. So despite a sideways market since these fear highs and lower/sideways lemming prices, bullishness (or complacency)  has recovered in at least these three fear gauges.

The CPC has an "ABC look" down. The TED and VIX are lacking new recovery lows and have not quite fulfilled this ABC look (Vix actually is a double ZZ down I would think).

So I would hope that the VIX and TED reach new recovery lows and follow the CPC 10 day average. If these all  reach new recovery lows,  then we have to start looking for a downturn in equity prices no matter the wave structure.  

So if we get a squeaker high above 1100 or not, or even make it above 1131 or not, or even just top out at less than 1100 we need to heed these indicators and, if we wish, act upon them at the appropriate time.
[Update 6:03PM: The CPC chart 10 day average is really getting a workout here. One thing you'll notice is when it moves it moves.  Not a lot of little squiggling between pivots. Based on that, if this 10 day starts moving back up, I'll be seriously looking  for a huge equity turn down shortly after.

It is simply amazing after all the mileage the indexes have put on as of late in lemming-like moves in both directions that the majority of real money is once again betting huge on upside.

Additionally, we can see that the big swing from market bearish high readings on the CPC weeks ago to market bullish and this is despite prices not rising much....which is bearish for prices!  Despite the whipsaw trading as of late, the price action has - through proof in this chart - worked out the excess bearishness in the people who actually spend big money hedging and such....not some retail survey. This is real money in action.

But it hasn't yet turned back up.
[Update 5:10PM: I'll make the call here now: Apple won't see a new high. It might be building a house and dome, or a triple top, or a nice base channel in a wave 2 expanded flat, but whatever.]
Market was dumping fairly good at the open and then selling dissipated at pivot support.  Fear also diverged at the price low today and there was decent positive divergence on the hourly.

So far any theory of Minor 3 down is fast approaching the wrong count.  We have simply no selling going on here yet.

So the primary count is that [b] of Minor 2 up had a low at 1056 today.  As far as a complex correction, I think its had enough as today impulsed up nicely in a 5 wave move. That leaves us looking for the top of Minuette (i) of [c] of Minor 2 up.  Back to the main down trendline could be the ticket here for the top of (i).
Pretty nice impulse and definitely better looking than the slop down from 1099 - 1056.
We need at least a new high above [a] to call this an [a][b][c].  However admittedly we also have what appears to be a 5 wave down from 1099 to 1056. So caution the tree might get shook again - who knows.

So again, its a schizo market and overall its bearish in my book.
Ultimately we want a minor 2 to continue for 2 main reasons:
1. To make sense of all this slop since the April high (leading diagonal) - and to form a better base channel.
2. To repair bullishness sentiment back to a near-euphoric state (well ok how about just the haters back on the comment section?)

The call is still sub-700 by January 2011. Looks good so far. Thats the bigger picture here.
Advancers may be leading the way. This shows there has been simply no selling of big tranches of stock as of late (despite the 50% correction in prices from 1099 - 1056). This chart very much supports the [b] pullback case.
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