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Tuesday, December 14, 2010

Elliott Wave Update ~ 14 December [Update 8:42PM]

[Update 8:42PM: Finally the e-minis did squeak out a new high today but the cash index failed by a quarter point. So in that respect we can chart squiggles from this afternoon's high being considered a truncated top which foretells weakness to come.

My purple line was breached today so that suggests the [v] of 5 is over. You can see the divergence on the MACD.]
4 hour MACD negative divergence is even more pronounced. Wave structure complete, retrace of the entire structure, at a minimum, is in order. At worst you are looking at a historic peak. At best a high level consolidation Minute [iv]. We shall see. Major peaks usually come without much warning or fanfare until well after the fact.]
[Update 7PM: For those who criticize that Intermediate wave (C) is much too short compared to (A) all I can say is so what?  Comparing fractals from the 2007 top reveals that how would we have counted 2007? I still struggle with that one. My point?  Don't get bogged down in a corrective wave which P[2] is, as was the 2007 high which seemed to be a cycle-size corrective. I'd much rather count the short term Minor 5 wave structure and go from there.

I often have spoken of wave 2's and how they actually tend to retrace above the "standard" 61.8% Fib marker. 70% - 72% can be very normal.  I am not a fan of higher retraces above 74%.  The Wilshire (total market) has retraced now 70.5% which is right on the money. So we still have room here.  Has it conquered Lehman day? Maybe for a short time but a serious fallback toward Lehman levels has yet to occur to test as support. I'm counting on failure of that test.

This chart I think speaks for itself.]
[Update 5:50PM: The Industrials are less ambiguous where this wave up structure, which probably counts best as five waves as I have labeled, could begin as it has a differing low than the Wilshire and SPX.  So there are less options.  But it still works as an overall count. The second chart seems to be confirming that this is a wave [v] of 5 event as I have labeled.  Breadth is waning and weak and now a small divergence. We'll see how price behaves. A big downdraft would not be surprising here.]
Breadth Thrust is waning and a small divergence. Oscillating around the upper Supercycle channel line all year.  Big selloffs tend to have occurred from this line. So if prices slip under it, be on your toes!
Yesterday I suggested that there is now a valid substructure in place for us to consider Minor 5, indeed Intermediate (C) complete. Now we are looking for some kind of confirmation of our proposition. We are also adding to the current structure evaluating and adjusting and strongly considering other alternates.  Thats what we do. We propose a valid structure then we look for confirmation and tweak at small degrees (hopefully)

Fractured markets at both tops and bottoms are one such sign that the market may be turning.  Today was an example in that the DJIA continued to a new intraday high but the other indexes did not.
So today as more wave evidence piles on, we must consider tweaking the wave structure to fit with what is actually happening.  Our top alternate is that only Minute [iii] of Minor 5 topped out and that we will experience a sideways Minute [iv] and then finally perhaps a Minute [v] on some indexes but perhaps not all. 

Wilshire hourly shows the top alt count.
And both the WLSH and SPX 10 minute charts. Overall the waves since the high yesterday look corrective (so far unless it all falls apart tomorrow which would be sweet for da bears).
Our GDOW chart has not quite fulfilled its wave count
The other thing that bothers me is that I have the NYAD count as an extended wave 5 yet it hasn't made a new high yet to fulfill its count.  Why is this important? Because an extended wave 5 tends to not end in truncation.  Its kind of like an Ending Diagonal pattern where the rule is that the final wave 5 in an ED must make a new price high. Its simply required. Extended wave 5's fall into that same view in my opinion or else it would have never been extended in the first place.
Gold I also have in an extended wave 5 which is not yet fulfilled I don't think.  A breach of my proposed wave 4 triangle will confirm to the downside and eradicate this view.
We should be willing to give the market bulls the benefit of the doubt with the alternate count.  Although SPX 1246 has worked like a charm in repulsing any moves higher over the last 2 days, we must consider that the bulls may be not quite done yet. We have enough of a structure to speculate wave 5 high may be in place, however we have no confirmation just yet. We have no key support levels broken on the cash index and we have no 5 wave structures down just yet which is key.

Additionally we have an unfulfilled GDOW count and potential unfulfilled GOLD and NYAD extended wave fives.

At the least, we should experience alternate count Minute [iv] weakness. Anything sharper or deeper will have to be studied for an impulse pattern down.  

So keep adjusting and probing your counts for the "best fit" and best look and be nimble. 
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