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Wednesday, August 18, 2010

Elliott Wave Update ~ 18 August [Update 8:59PM]

[Update 8:59PM: Some negative divergences occurred at today's high which I suppose foretold the end of day after hours selloff.  The secondaries showed some bullishness in achieving higher highs while the SPX and DJIA did not.

These divergences are good for catching weakness.

(On the flipside, note that the recent low all occurred simultaneously on all these indexes which suggests there is no real positive divergence occurring. In other words this supports the notion that this is a dead cat bounce wave (ii) before a (iii) down.  As an aside, the 1010 SPX low occurred over these 6 indexes in 3 trading days which suggested an extended rally.)

But the cash index has yet to reflect that divergent weakness.  So that may suggest a weak opening tomorrow to fulfill this divergence.  Then it must hold support. You can see some charts count decently as 5 waves up, which even if the 5th wave peak is some [B] wave high in an expanded flat x wave or something, still suggests more (eventual) upside for at least some of these indexes even after an early plunge if it comes.

Thats why 5 waves up always suggest that the high is not in (unless its a C wave in a flat - which doesn't appear to be the case here). 5 waves is always followed by at least 5 waves thats the theory anyways. Or at the very least, if the 5th wave top is a "B" wave in a corrective cycle, then still, that suggests a new high to come in a "C" wave.

So in both instances, 5 waves suggests the high is not in. Thats the theory. But again, we are quibbling with squiggle waves here so....

The really bearish flipside is that it could mean a new price low, perhaps (iii) of [i] to come since we already show divergence after merely a few days bounce. Count be damned in this case on the secondaries, its the DJIA and SPX that matter.

I post this to see how it all pans out so we can learn from it.

[Update 6:52PM: Update on the NYAD chart. Here was my original suspicion the other night

Here is the updated chart. if this again makes new highs, and SPX prices are way off their 1129 recent high, well, maybe its golden for the bears.

I did do an original calculation  that 1106 would allow this NYAD to make new highs. So far, that could be on the mark.

[Update 5:51PM: Sippin on a rum cocktail, just dreaming up OPEX BS chart patterns.   The double zizgag could be in play but we may gap down tomorrow first due to the divergences at the highs today (chart on that later). That could be an "x" wave flat if we were to have a double ZZ.

Also note how I conjured up an apparent ascending triangle in the mix too. Its all very bearish and I have patience...

But one thing I wanted to mention, is that the ending diagonal count to Minor 2 does not seem to be so. If it were, we should have seen prices collapse under at least 1056 by now.  I have had the Minor 2 double ZZ count up instead of the ED and so far my instinct on that seems ok.

Of course under the double ZZ count, the clear 5 waves down from 1129 could be, under a double ZZ count, the (c) wave of an expanded flat [x] wave. I showed that here basically

So tomorrow could conceivably be "make or break it" for any kind of ending diagonal counts at the 1129 high. It either heads under 1056 by Friday or I say the ED is BS if you know what I mean. But not that we still don't have a bearish double ZZ option as I have had labeled, its just that it may take its time working down in prices, ala August 2008.

The January ending diagonal triangle in the DJIA was a true ending diagonal as it only took three days to drop 550 points and wipe out 21 days of upside price struggle. It went lower also in price than where the ED count started. 

Remember your EW teachings. ED's are supposed to show price "exhaustion" and a rapid collapse back under from where it started is supposed to happen.  So far that has not been the case here. So the ED is somewhat suspect and that leaves room open for a more spongy market count for the next week or so. This is not to say that the charts don't count bearish overall, they do to me, its merely to point out that we have more options for quirky counts... Hey a drop from 1100 to 1065 is still a nice drop for instance....things have perspective.

So I give it til tomorrow/Friday at the latest to get under 1056 to say it could be an ED of some kind.

Today threw a monkey wrench in our perfect count. Oh well, was bound to happen on a low volume August day just prior to OPEX.

On the Wilshire we have arguably 5 waves up. Top of a? Or working a double ZZ?  Or neither?
I wonder if there is enough volume to take out the 1056-1065 pivot(s) this month. Will we meander for a few more weeks?  This chart on my weekend post suggested we could although it may be too aggressive.

Here is a look back at 2008 and the August time period prior to the meat of Minor 3 down.
So overall, we are meandering in between good support (1065-1072 area) and heavy resistance (1100-1105 and more above at 1113-1115 or so).   Maybe near the end we gain enough energy to break above 1105 for a spell.

I just really don't have a firm opinion at the moment although I do like EWI's 8-9 day turn time which is either tomorrow or Friday (and it would be a turn down). I am short, but not anxious to cover nor add.

It wouldn't surprise me of we tank here and hard and do manage to break support.  But it wouldn't surprise me if we didn't either. I guess the lazy summer has caught up to me.

I'll have more charts later.
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