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Thursday, July 22, 2010

Elliott Wave Update ~ 22 July

Very nice upside market internals today but total volume was crappy (at least for futures). And this is exactly what we would expect for the final bullish phases of this market. The volume should be a worry for bulls. The upside internals have been flipped so many times lately in lemming moves by the algo-driven market that every 90% up day that comes along almost doesn't matter anymore.

Primary count is that (iii) of [c] of Minor 2 is in play. Need a break above 1100 to confirm something for the SPX. The transports and NASDAQ 100 did break their recent pivot high so we do have at least a few indexes that have broken their July 13th highs where 1099 on the SPX resides.

The markets cleared one down trend line and stalled created another.
Fear package chart shows the VIX had a very stubborn day despite the massive up day in the indexes.  It means something, just not sure what yet. Top thoughts are that the stubborn VIX proves that traders are still too cautious and bearish (and who can blame em?) and refuse to make that leap of faith back to "this-is-a- new-bull" type thinking. It would be nice if that leap of faith occurred and the VIX gap was at least challenged.

The other thought is that P[3] is exerting overwhelming social pressures and fear is starting to become more of a prominent emotion that refuses to reach back toward certain comfort levels that occurred during the P[2] rally.

Yet no doubt that these charts help prove that fear has certainly subsided.  The CPC 10 day average may be curling back down for a final wave. It would all fit so nicely together if that happened.
The cumulative chart is something to behold. Having a dogma that this chart will always lead to upside prices is most certainly faulty thinking.  We have a significant double divergence going on. Maybe this is leading but maybe its showing a major inflection point and a bearish one. The sensitive Ultimate Oscillator is acting negatively.
And why should we think new accum highs mean new stock price highs? Here is the weekly version of the same chart. Reached new accum highs late 2009 yet stocks are no where near their previous 2007 peaks are  they?

My point? It makes sense there would be the same negative divergence on the daily chart. Buy stocks here at your own risk.
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