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Thursday, August 19, 2010

Elliott Wave Update ~ 19 August [Update 8:05PM]

[Update 8:05PM: Finally the last chart that gives me pause is the Euro. It has a very nice 5 waves down but no retrace wave [ii] up of any price significance.  I'd prefer it visit my "blue box" no overlap range, or the point of recognition for wave [i] . However, technically its not really bullish looking at the moment, if anything its more bearish I think.]

[Update 7:30PM: My NYAD chart count is still "unfinished" business to a new high and an anticipated significant double negative divergence with market prices.   Today's downdraft was not enough to overcome the last 3 day's worth of accumulation resulting in a positive divergence on this NYAD since we had a lower close.

If that positive divergence is going to pan out, tomorrow is likely the day. If the positive divergence is going to get rolled over, again, tomorrow is likely the day.

So we have the NYAD, NYMO, Wilshire squiggles all supportive of a flat pattern which means bullish OPEX for the "c" wave to play out. These little positive divergences and contradictions (unresolved Wilshire 5 waves up) me pause for OPEX.

Maybe futures will help sort it out overnight...

Again, I am blogging this stuff so we have it recorded and we can learn by seeing the outcome.

[Update 7:04PM: Although the price damage inflicted today very much hurt the bull case overall, there is still a possibility that Friday OPEX plays out unexpectantly bullish. Certainly we have a gap down target and even some intraday chart openings on the SPX that could be targets.

And we have potential flat patterns in a lot of indexes and 5 waves up that doesn't yet compute....

The NYMO I guess can be considered positive divergence as of the close today. Lower SPX closing price, higher NYMO versus last closing low.  Again, the 1070 area, as I have blogged in the recent past, is an important marker.

Certainly OPEX could provide the "juice" volume needed to either get the market under this resistance in a wave (iii) down or enough juice to get it back up in a short-covering squeeze back toward 1100 toward a wave (ii) flat.

As I said, tomorrow should be interesting.
[Update 6:43PM: Looking at the Wilshire, one cannot get over the 5 waves up from the (i) low.  The retrace back is very deep which suggests a potential wave (ii) flat as the b retraced exactly 90% which is what is required for a flat pattern.  I think OPEX will be a very interesting day. At the least, if its a very bullish surprise, we go into the weekend in a bullish state of mind unprepared for (iii) down.

It almost feels like the big traders are all away on vacation and the juniors are allowed to run the shop for a while as long as they stay in a range (1070-1100?). And then of course the juniors are racing up and down within that range as much as they can get away with.

Like letting your son take the car out, make sure he doesn't stray too far and brings it back in one piece...yet you know he burned rubber a few times just going around the block....

Wave (iii) is coming is still the best count, but on its terms.

Well, we'll see soon enough.]

[Update 5:22PM: There were no intra-day divergences on my divergence chart between indexes.  I take this as (ultimately) a bearish sign as stocks are moving very much in lockstep together as far as the indexes confirming each other. What it means for tomorrow though  I am not sure.

Ultimately a high stock correlation - which has hit records in the stock market lately - is a conducive environment to a major market crash.

And then you have the Hindenburg Omen thing which at the same time shows a fractured market.

Well the divergence I showed in last night's update did result in our suspected gap down weakness. And instead of holding upper support, the market broke down into the lower 1070 support.  (I had forgot about the open gap up - duh). The move down did some price damage and market internals were pretty bearish considering the very light August volume we have had lately. 9th worst day since the April peak as far as declining ratio of the NYSE

Additionally, the squiggles down impulsed pretty nicely. So overall the market seems to be signalling its on the verge of stepping down under the 1065-1070 area in a wave (iii) of Minute [i] of Minor 3. Exactly the precise pathing is open for speculation as tomorrow is OPEX, but in general, the idea is to short any rise I suppose.

This down wave has the potential to be a very nasty little downdraft.

This chart shows an alternate (ii) expanded flat scenario not necessarily as the primary count keep in mind.  The overall point is that a wave (iii) should break all the major support pivots at 1056, 1065 and the ever-familiar 1070 line.
Overall market internals.  You can see the market is at the price level of the last big downdraft bear candle of 29 June.  A power wave (iii) down would re-confirm this as a bear mass selloff point.
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