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Tuesday, July 27, 2010

Elliott Wave Update ~ 27 July [Update 7:56PM]

[Update 7:56PM: The market is again challenging one of the big 3 mass market sell decision points candles.  There are 3 of these candles and they are based on scary downside internals.  The first was the May 6th flash crash.  The last was the June 29th big bear day. The market has recently managed to finally get away from that candle and it now has moved to the middle bearish candle - the May 20th big bear day with 73 down volume ratio on the NYSE and 19.44 decliners ratio.

We can see that the June high tried to get above this mass market bear candle but was quickly reversed after a few days of consolidation near the top of it and then produced another sell decision candle - June 29th.

We now have the same situation we did in mid June. The market is, in effect, trying to reverse this 20th May mass market decision point and achieve "escape velocity" from it.  I don't think that will be easy and in fact the market should fail in this area..

Today was just such an example with the price action: The market tried to gap up and run over the top of this May 20th candle and it got quickly slapped back down.  Then it tried briefly again in a weird second spasm. Also notice how it closed less than 1 point under. Weird huh?  The market knows where its at. 

And of course the moment the market tries to make a real move above it should end in failure and mark the top of Minor 2.

Market internals are getting weaker and weaker these last few days.

So the market has already spoke to us and left a clear map. It had painted a mass market sell decision point and the market doesn't forget where this spot is at. It will not be re-conquered easily even for a gap up spike-and-run. In fact, its a good bet it won't be reconquered at all.

I suppose the market will hang around until the 30th July preliminary GDP report release and then attempt to run over the candle top. Short the crap out of it is the game plan.]

Nothing much to add. Price action is converting one bear at a time to cover or turn bullish. Sentiment is correcting for wave 2.

The price spike this morning is usually labeled as a subwave iii of (iii) or marks the top of (iii) itself. Its just another clue of where we are likely in the wave structure. Obviously a triangle (that may break downwards first) traced today so we don't yet have any impulses down.
If we use the truncated low of 1015 SPX, we get [c] = [a] at 1040 SPX.  78.6% of [a] from the 1010 low gives is a 1026 target. So that seems a decent target range for Minor 2 (1026-1040) and the subwaves seem to agree. 1140 is also the 61.% Fib marker.
Forming a new head and shoulders pattern. This one is more bearish with a down-sloping neckline.
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