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Friday, July 23, 2010

Elliott Wave Update ~ 23 July

Primary count is that wave (iii) of Minute [c] of Minor 2 is playing out. The theory suggests once we find the top of (iii), we look for wave (iv) then (v) to peak.

Squiggle count is a potential series of 1-2's and come early next week, the rest of (iii) up will proceed. Potentially very bullish price action.
It makes sense that this may be the Minor 2 wave and not the June peak. Bearish sentiment clearly bottomed heavily at the 3 day bottoming event at 1010 SPX.  And there has been no solid evidence that we are in a Minor wave 3 down.

So wave 2's push is supposed to strengthen sentiment to the point where most bears are crushed.  But being this is a wave 2, sentiment is not expected to reach the previous extreme which was a very good extreme.  Basically this wave 2 would run out of buyers.  And with the bears skewered, there should be some pretty big down moves to come maybe even a flash crash.
The VIX is still stubborn but if it keeps knocking on support, it will lose it.   This stubborn VIX probably represents the fact that people are still in disbelief that the market has just closed over the 1100 level and seems to be heading further up. 

But make no mistake the weekly is still looking long-term bullish.  It has room for its RSI to drop back toward the up sloping RSI trendline. It  makes sense that it comes back toward this trendline and hits it again.
The 10 day CPC is still curling under back down. All these fear indicators peaked somewhere in wave [iii] (not TED) down which is exactly where the most fear should be inside a wave three.  Then as wave five plays out, sentiment then hits bottom.  MAX fear inside wave three, max sentiment at bottom of wave five. Now I don't have a chart showing sentiment maxed at the bottom but you can look up II or AAII surveys and see it easily.

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