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Tuesday, August 31, 2010

Elliott Wave Update ~ 31 August [Update 7:40PM]

[Update 7:40PM: There are probably many reasons for the bulls to expect a big rebound to come. Its a new month (and a lot of times that has been bullish in recent past), there are some positive divergences floating around including the one on the NYMO below and we have fairly bearish sentiment in certain surveys (AAII). In addition, we have both trendline support (3 touches) and horizontal support intact.

Add in that declining volume has diminished as this down move occurred over the past few weeks and it would seem that sellers are nearly exhausted. Throw in a dash of positive seasonality and you got a recipe for one last bull "hurrah" to wherever the algo's can take it.  From a wave standpoint, it could be easily argued merely a 3 wave move down so far....

However there are certainly bearish things going on too. Mainly the wave structure lacks a 5th wave down probably resulting in an unfinished structure. And despite every attempt so far of the bulls trying to get a sustainable rally going, prices have been lackluster to say the least and seemingly in a herding pattern of all or nothing.  It might be easier at this stage to produce nothing (herding to the downside) than it is to entice buyers to move this market back up toward 1100 SPX or even 1070 SPX.

But at any rate, the sideways motion of the 1040 - 1060 range is likely nearing an end. Or the beginning of nearing the end.  Volume should return in a bigger way next Tuesday.

It would be most delicious if the market spasmodically broke on an ebullient spike in the morning while breaking the downchannel upper line with force.

CNBC would be chattering and doing their usual bull smack only to see the market do what it did on the first trading day of 2nd September in 2008 (albeit that was post Labor Day).  A most bullish spasm followed by selling all day. (note where I have "orthodox 2" marked.)

Well we'll see. I actually don't mind higher prices. Its easier to enter a trade position at higher prices than it is languishing here yes? Nimble is the way to be. Yet it would be nice to see that 5th wave....
[Update 5PM: I use the Wilshire because it paints excellent trendlines and usually waves too.  Today's low was a third touch of the up trend line shown below.  Usually if bounces occur off these trendlines, they happen at least on the second touch. [Update: Actually looking at July 2009, it made 3 dips to form the trendline]

The market has reached an apex point at the very start of historically the worst month for stocks.
I remember 2008 when September opened, the market opened with a tremendous bullish spike only to sell hard right after and trapped a lot of bulls.

Would be a chance for a replay tomorrow perhaps. A very bullish rush out the door, only to collapse soon after.  Price action has been very squirrelly lately...

Original Post:
Primary count hasn't changed: Wave (v) of [i] of Minor 3 down.

Due diligence: If this bear count is going to fail us miserably, and the market goes full bull, tomorrow is likely the day that will happen.

There were no divergences on this morning's intra-day low as compared to yesterday's low between the DJIA, SPX and NASDAQ.  And then this afternoon's dip there were again no divergences with the morning price low. So we can conclude, at the least, a lack of bullish divergence during both of today's price lows on all 3 major indexes.  Usually if this was some sort of "bottom" area some kind of divergence would have developed. Doesn't have to, but they usually do and so far we have none.

In fact there has been a remarkable lack of any kind of divergences between intra-day prices:
(I haven't checked closing)

It all looks rather corrective, a consolidating period prior to a break of 1040. Will it happen? The waves suggest it will but only the market can decide when it is ready. Tomorrow is a new month. There could be an increase in volume and portfolio "adjustments".

Of course the bulls want to break over that down trend black line and create a squeeze. And then of course break over the larger downtrend channel line that is shown on the Wilshire chart lower down.
So we'll yet again keep the same primary count: Wave (v) of Minute [i] to a new price low under 1039 SPX.  And due to (i) and (iii) being practically equal, and 1010 still a ways below, we must be on the lookout for an extended wave (v) scenario.
Wilshire did though deviate slightly as compared to the 3 index chart above. I supposed that helped signal the rally from "b" to (iv).
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