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Wednesday, March 31, 2010

Elliott Wave Update ~ 31 March

Triangle is still intact on the cash indexes.  There is not much to say at this stage. The 1st day of the month/quarter  is finally upon us.

Bear case: The market is (over) due for a nice rip-roaring distribution day and what better time to do it than on the 1st of the month/quarter. Also technically  everything has a bearish head and shoulder pattern  going for it.

Bull case: Price action and wave pattern (triangle) suggest that this market is consolidating for a thrust move to test higher levels.

The triangle pattern has to be respected as long as it holds.  It is a common mistake to label a triangle too early (perhaps as I have here). I am not sure if this is the case here or not.  For instance, a move up tomorrow could form a true [d] wave peak and then a new [e] wave could reverse down. People would think the triangle is "over" when the [e] wave occurs and that is exactly when the market will move big and reverse to the upside. [e] waves can have that effect.

So the bottom line is you have to give the triangle room to unfold further until it is no longer possible.  This is what happened in the sideways Nov to Dec action.
1161 is a key support level on the SPX. 1150-1153 is the major support level.

Its interesting that the market is gyrating around the 1170 axis as much as it had the 1070 (1071) axis.  Except this time the market has excess bullishness in some areas and signs of potential exhaustion.  However the last time, the market was able to break out of that gyrating axis and gain approx 41 points (to 1112 SPX) before correcting back to 1086 again.

E-minis

Tuesday, March 30, 2010

Elliott Wave Update ~ 30 March [Update 9:30PM]

[Update 9:30PM: I added the following link to my blogroll.  Check it out.  They seem to be able to gauge and predict with very good accuracy using a variety of consumer information, if the economy is expanding or contracting and at what rate. Despite the massive stimulus, their leading indicator shows the economy dipping into contraction on March 19th.

The market seems to lag a bit. This slight lag is exactly what Robert Prechter (and indeed EW theory) theorizes. Social mood (economic output or activity) turns first, markets (and government economic fundamentals lies  "stats" lag even more) 

[Update 9:05PM: If any stock is lagging, its got to be the king, XOM. Oil is again testing for a breakout of $83 and a run toward between $85 and 90.  Will an oil pop over resistance result in XOM getting its groove back and close that gap down it has?   The "driving season" is almost upon us maybe they get it started early.

It just seems "they" (I say that tongue-in-cheek) have XOM in their back pockets ready to run-up when they need it to and risk starts to wane a bit and takes a back seat to "safe" big stocks. Everything is getting run up afterall it seems. But XOM is such a widely held stock, it is a decent stock for wave patterns. 

Ultimately $90 oil is not bullish for the economy.  But oil can be said to be charting an ascending triangle. Are there a lot of shorts just above the rally high? 
A weekly move over the 50RSI may spark a rally in XOM. Weekly MACD is ready to crossover.  Its actually has a nice chart pattern. Long term, yes a huge triangle.  But it seems the [E] wave is not quite fleshed out just yet. But it might be in a matter of weeks or a month]
Still more triangle-type waves of zigzags up and down.  Primary count has it as a minor B wave triangle.  This count is easy to verify as any [e] wave low price cannot go below the [c] wave low price.  A break below [c] could still be a corrective wave but not this triangle count.  

So any break below [c] could be considered a failed triangle.  I'd guess that this is a good candidate for failure (because of the uncertainty of the overall larger count) so keep an eye out. 

And yeah, the market is garnering a lot of attention, but will it garner any less attention at 1200? 1220? 1240? Will it not be keenly watched just as much or more? I don't get that reasoning nor do I care.

So in that respect, yes we are watching for a boiling pot. Everyone is. And that will not go away. But it doesn't mean it won't boil. And now all the talking heads are all of a sudden cool, calm experts on sentiment and the markets: http://www.marketwatch.com/story/stocks-correction-in-gurus-crystal-ball-2010-03-29?dist=afterbell

It may show a possible triangle here, but unless we get a clean, fresh buying spree (perhaps the new month/quarter will bring some), I think any break upwards is going to be short-lived and prone for a big reversal.

Watched pot be damned. My favorite glib line "correction comes when everyone leasts expects it" is I think a most overused term and overrated.  3-4-5 weeks of steady gains are likely to be wiped out in only a few short days or even hours of trading.  That never seems to change. 

What also does not change is that this market will get sold to the mom and pops as much as possible before turning in a major primary peak. That is indeed likely happening to some degree now as my personal observations support that view.

The ROC's on the daily and weekly grow ever closer to dipping below the zero line.  The rally is waning.

E-minis

Some indicators have reached extremes not seen in the last 7 years. Here is the Nasdaq100:
http://www.market-harmonics.com/free-charts/sentiment/nasdaq_sentiment.htm

Working itself for perhaps another crack at a high. But technically, the stochs and MACD have a weak look at this moment and overnight volume candles favor the bears .  (but all that has been rolled over before)

Monday, March 29, 2010

Elliott Wave Update ~ 29 March [Update 7:10PM]

[Update 7:10PM:  The DJIA seems to be in its own count.  This squiggle count has a lot going for it. Impulsing in 5 wave patterns.  Could be on the final waves to a wave [v] high. Obviously 11000 is the target. I like how the 38% and 62% Fibs line up under 2 key pivot points.]

The last 2 weeks of waves have reminded me just a tiny bit of the sideways November - December 2009 B wave (what we called it at the time) correction.  The market gapped up numerous times only to wind up selling off or gapping down numerous times. Yet a trading range held until it could muster up a breakout.  So today, after 3 days of gapping up, this one did not close before end of day.

(To be fair the waves also reminds me of the sub-700 SPX in that it just kept going down in a "pushing" manner and sentiment reached bear low. Here prices may be "pushing" up and sentiment is working toward a bear rally high - See SPX 1 minute chart at the bottom)

One interpretation is that some kind of Minor B wave is forming on the SPX and Wilshire and it has yet to reveal its hand.  The DOW however, seems to be in a differing pattern and perhaps wants that 11,000 "hit" first which is dragging everything with it upwards.

The Wilshire 10 minute chart shows the general thinking here. There could be a complex B wave forming. Or perhaps an expanded flat or some kind of triangle, either ascending or contracting.  We just don't have enough info yet.   The pattern is similar on the SPX. 1150 is a key level overall for the market at this stage. It has spent enough time elevated above that any close below 1150 may be taken as a "false breakout" and looked at as bearish.  
Certain bullishness indicators are certainly concerning for the bulls. Yet the market's price has held steady and thats all that matters.

Overall  a Minor-sized "B" wave corrective implies a Minor sized C wave to come that will push the markets even higher. How high? Look for a Fibonacci relationship between C and A.

But first I am not sure if we are in a B. It has to have the "look" on the daily first which it has yet to do:
Here is the non-log version of the SPX:
Perhaps we just keep chugging upwards and the market may be forming yet another ending diagonal triangle. Too early to tell, but a significant new high by a few points hitting the upper trendline may be a clue. This has a potential again, as the market just keeps "pushing" in ABC-type moves.

So tomorrow is yet another key day in the life of this market as it is simply open-ended at this moment in time.

E-minis

Yet another gap up. This time on Sunday night e-minis. Gap remains unclosed. Of course the dollar gapped down on opening. So we had two gap up situations on the SPX Thursday and Friday. Now lets see about Monday.  Its interesting price action for sure.

Friday is the unemployment report. Expected +200K.  That should be great news. End of month/quarter window dressing.

Saturday, March 27, 2010

The Financial Complexity Bubble and Bonds

Bonds have now gotten attention. Wave 5's usually do produce attention.  30-year Bonds are near the long term 30 year channel in prices.  Somehow this channel is recognized that, if broken under, it is very bad for bonds and stocks in general. An interest rate rise of only 2% would be serious headwinds to the economic "recovery".

To me its all part of the ponzi awareness transformation that is occurring amongst the population. I have yet to formulate a "unified theory of ponzi awareness", but I am trying hard to figure it out. Its my theory on how a P3 can occur even if sentinent is bleak.  The underlying postulate (rule of ponzis) is this: There is no upside surprise in a ponzi. Once a ponzi is fully recognized for what it is, it collapses rather quickly. 


Will this happen with bonds? (and hence the equity markets since debt is the underlying leverage behind everything.) 

I think about sentiment everyday and use a sentiment service.  Sentiment is the heart of Elliott wave theory.  There seems to be growing awareness of how sentiment plays an overall part in how markets move. This is also particular among retail.  For instance did you know that the AAII survey has actually gotten more bearish over the last 3 weeks as the market has rallied in the same time?  Is this bad or are they just now aware of how when they answer a survey, people are looking for them to be the "dupes"?

If your smart enough to be answering surveys from AA, aren't you smart enough to figure out why they want you to answer their survey?  Do you want to be the "dupe" who is used to determine if a market top is in place?

I suppose though, that in the end, no matter what the awareness, that they will indeed be the dupes to determine a turn. So in that respect, this market may indeed just chug along until the "correct" level of bullishness finally comes out. Yes, you can call that capitulation to a survey.


Does this matter? I am not sure to what degree.  Programmed trading is starting to dominate the markets and there is a plethora of information that they process.  This ain't your grandma's market.

Another aspect of sentiment is will it be any better at 1200SPX or more? I have seen numerous commenters say "it won't turn until XX is met". Well what if XX is met? Think you'll get your magical turn even then? Won't you be turning bearish then?  Won't the AA survey people get even more bearish the higher this sucker goes?  Won't that keep the turn from happening?

Is there not an awareness that this is yet another bubble of massive proportions and indeed this is the final bubble possible? And this bubble is a debt bubble? A derivatives bubble?  And finally, how about we just call it a financial complexity bubble?


A debt bubble can only be the final bubble. There will be no other debt bubbles in our generation once this pops for good. This is reflected in the waves. Will it really be Armageddon going back to 1970's prices?  Was the standard of living (modest housing, simple financial marlets, etc) in the 1970's that horrible? ( I can answer no it wasn't) Does everyone need to be a millionaire?  Do we need mega-mansions on every corner? Do CEO's really need $100M?   Why cannot banks just do simple banking?

Its a MASS ASSET MANIA and it will not sustain forever.


Another heart of Elliott wave theory is that nature corrects human progress at many degrees of trend.  The complexity that has grown in financial products and the way the world "does business" needs correcting to a large degree.  This correction will not be orderly.

Yes there are signs that things are not right and the shadowy, complex banking world is where the first stressful "unexpected" things occur. They are occurring now:
http://www.zerohedge.com/article/more-meets-bottom-line-are-banks-getting-crushed-due-negative-swap-spreads-and-190-trillion-

Read the comments too.

Well back to the simple bond price chart.  


The peak is assumed to be never reached again (complete with a brief overthrow of the channel) We likely saw the top of 30 year bond prices early in 2009.  The pattern seems to be tracing a lazy 5 wave primary wave [1] down but we need a break under $113.12 to confirm. When plotting yields instead of prices, it appears to track better for wave counting (EWI tracks the yields).

Basically I am looking for a double shoulder pattern to the head price peak. a break under $113.12 to the neckline of this double shoulder pattern would be too perfect. And then a rebound wave [2].

None of this is assured of course, its just the best wave interpretation we have for now. Bonds take a long time to move sometimes so its a patient process.  What would scare prices back to a wave [2] retrace?  I can only think of one thing (and it rhymes with "see me")

Eventually bonds will break the 30 year channel for good.  And we suppose that is when "all the same markets" will kick in during the heart of an asset collapse in the heart of a primary wave [3] down in everything (commodities, bonds, equities). This would be when the "financial complexity bubble" gets jolted into a major correction.

So you can see it all does make sense.  And even though we can tell the world about it, will that knowledge and sour sentiment keep it from actually happening? Does a watched pot ever boil? (Well yes of course it does, you just need patience)

Thats back to where I postulate that society in most parts of the world, particularly the western world, a slow transformation is taking place into a general "ponzi awareness" theme and that yes, even when sentiment goes rock bottom, things will still occur as they must. The waves cannot be stopped nor controlled by a single entity like the FED.

Right now there appears to be a lot of outright anger in society. EW theory predicted this.  This bear anger is the result of many things as each individual manifests this phenomena against their own perceived grievances. But when it comes to the financial markets a massive moral hazard is occurring created by the endless bailout polices of governments all over the world and the lack of fear is allowing a massive rally in asset prices. After all, when you have nothing to lose and a moral hazard has occurred, who cares right? The government will take care of it all yes?  A complacent anger fueling P2.

Well the government has nothing but paper promises. As Robert Prechter likes to say, the government is the herd.  We are just not fully aware that we have reached a sort of mass insanity stage of things.  Its slowly creeping into the conscious. And as it creeps even more, anger as the primary bear emotion, will eventually exhaust and be supplemented by mass doses of fear again.

And even when sentiment goes sour, remember the first postulate of ponzi theory states, "when ponzis are recognized for what they are, it collapses rather quickly." Oh yes, this is a bear market rally in my opinion.

Will this all happen this way? Am I way off base?  Time will tell. I do know one thing: We broke the simple math on everything.  It cannot be sustained.  Squaring the math will be a earth-shattering process.

But mankind will go on.  Its a standard of living adjustment.  And in the end, a lush forest grows from a burned out one.

Friday, March 26, 2010

Elliott Wave Update ~ 26 March [Update 8PM]

[Update 8PM: A few things stand out on the IYR weekly  chart: 1) Its overbought at major resistance  2) IYR doesn't seem to do negative RSI weekly divergence.  The RSI peaks at the same time prices do.  3) ROC and volume is waning over time. 4) The inverted H&S pattern target has been met  5) The breakdown gap from 2008 was closed. 6) It retraced over a healthy 50% from peak even though real estate is no where near out of the woods yet in fact its showing signs of turning down even more. Possibly the biggest disconnect in the history of anything.

Note on the waning volume comment (and volume in general): Its hard to keep saying "no volume" in this P2 rally.  When you look at the candle bars, even this week's candle volume bar dwarfed anything that occurred even in late 2006.   So can I honestly say no volume here? Of course not. But in relation to the beginning of P2, the volume is declining. But all in all, Its hard to make any kind of determination concerning volume when even the lowest P2 candle dwarfs all those years in the beginning.

But all in all, if your going to short real estate, this would be as good a spot as any on the entire P2 rally I suppose. I'd rather short at 70 RSI on the weekly than not particularly since the IYR tends to never show any RSI weekly divergence. Due diligence of course.


[Update 6:50PM: The "All In" charts. is it safe to count waves on the NYAD? I don't see why not! It seems to work I think. You be the judge.

Looking for a wave (4) to finish out here on the NYAD and then a wave (5) of [5]. This fits the B wave scenario in the SPX, and then a C wave to P2 peak. Thats about the best I can do is take it one month at a time for now.

As bearish as I am, its like flying an airplane I guess. Constantly cross-checking and scanning various instruments to see if your in the pattern, at the right altitude, wings level, etc. It looks like there is a wave up missing on this chart at the very least.
Even the weekly counts nice in a much larger pattern.]

[Update 5:25 PM:  All the waves appear to be in place, as a minimum, for Apple. The daily shows a double negative RSI divergence. The ROC is slipping also.

Also I suppose its rare to see a double negative RSI divergence on the hourly, daily, weekly and monthly showing single divergence in a 12 year cycle wave pattern that appears to have every wave in place down to the squiggle on an individual, well publicized, high flying stock. Well here it is.  And yes, these kinds of stocks can and do often run right over this kind of stuff, so well there you go.
The squiggles confirms that there certainly "appears" everything is in place. Doesn't mean its the high and couldn't extend (or that i have the labels grossly misplaced), just means that a minimum wave pattern in place  as of now.
Even the Apple weekly shows an official double negative RSI divergence. And the ROC may be waning. However the weekly candle is a bullish candle so....
Even the Apple monthly looks like an excellent EW pattern and the technicals support the overall count.

Primary count has not changed.  I have the market correcting in a Minor B wave of (Z).  Normally a good B wave would be a 38% correction at least.  Since I am referencing 1086 as the start point, thats 1044 on the SPX.  At least a 24% correction should be had here and that is 1158 which the market has not yet corrected back to.  Or somewhere in between, maybe 1150ish support.

In any event, the waves seem more corrective down when looking at the entire move down rather than impulsive just yet so that supports a corrective wave of some size. My take at the moment is a B wave.

The media ran a "market top" story http://www.marketwatch.com/story/is-the-stock-market-topping-out-2010-03-26  on a "classic reversal day". Sounds like the great H&S pattern in 2009. But as Kenny said, there is no real history of that classic reversal day except the 2007 peak.  So we'll assume that wasn't a P2 peak.  I do however think it may be an A wave peak.

If it was an ED pattern, then prices should begin down Monday into the 1150's.  However, an ED pattern is supposed to be exhaustive for the near term and today's action was not really looking all that exhaustive since it was a flat day. So I think the ED is looking flimsy.  We need bear follow-thru on Monday to confirm but my hopes are not high.
Here is the Wilshire in the same chart except you can see its slipped beneath the trendline a bit. We'll find out just how important this trendline is next week.

E-minis

Pretty aggressive buying overnight. E-minis have already retraced 50%.  Should be a real interesting day particularly if there is another gap up opening.  Watch for the internals too. If it gaps up, its likely going to have to stay open this time for the bulls until they get wherever it is they want to get.  Is it really 1200 and Dow 11000 or bust? Ok no problem.  Like I said last night..."yawn" at this stage. Don't blame me bears, call it the curse of the EWI "special update".
Of course the market is doing the inverse of the dollar (but only on dollar pullbacks) and the dollar is pulling back. And it could be the top of a wave 5 on the dollar too.
Good luck!

Thursday, March 25, 2010

Elliott Wave Update ~ 25 March [Update 8:45PM]

[Update 8:45PM: Here is a crack at the squiggles on the Wilshire. Remember, this is like 5000 stocks tumbling here all at once. Well anyways, I painted it with the most extreme bearish contempt for the market. (what'd you expect?) A series of ones and twos and tomorrow may be an opening that gaps down that doesn't close in a while. (anywhere between less than 1 hour and 25 years)

In other words, a very nice day of selling. And that only makes sense because at 1180, you had no permabears wanting to ever short again (yes I bought SPY puts at 1178 - I do play some of my pattern setups particularly potential ED's which can have large rapid price moves) and the rocket move down caught em off guard. Now looking at this avalanche of tumbling prices, bears hesitate to short because they figure its due a bounce up.  

But that bounce doesn't come in this case, only a gap down and still bears won't short figuring the gap may close only it doesn't. Selling continues and finally at 1125 AM, after a full nasty, 28 point SPX drop from the 1180 highs, they put on their first short...at 1152 support.  GAH.  Lunch hour finally has prices wandering up then their short goes red, they hesitate and bail on a jerky wave move up.

But then the day ends on the low and still, the biggest bears of them all, having seen an awesome market peak of 1180 and now the SPX sits at 1141 a day later and they have done nothing but lost money on... a short!

Frustrated, they have been thrown so off their game by now, they don't know what to do.  Having gotten squeezed continuously for 39 points up in a death march, they manage to capture nothing on the way down and even lose.  Yes I am familiar with this psychology which is one reason why I don't like to daytrade LOL. 

Anyways, the bullish count here? I guess that would be your looking at the most extreme 5-3-5 corrective zigzag in the history of P2 and we just gap up and run tomorrow.  That would kinda blow. I mean technically other than the 1 minute, there is no positive divergence on the RSI and MACD of even the 5 minute chart time frames.

Anyways, as always these squiggles sometimes oftentimes mean squat so due diligence and all that.]
[Update 6:05PM: Here is a follow-up to the VIX chart I posted last night.http://3.bp.blogspot.com/_TwUS3GyHKsQ/S6qarGX6g6I/AAAAAAAAEiw/JHcA4gUfrK0/s1600/vixdaily.png This was one reason to consider the ED pattern then big price reversal as last night's VIX suggested a bullish VIX was in development.  I'm kind of looking for it to move to its 50DMA.  It closed above the 20DMA.]



[Update 5:48 PM: Inverted Head and Shoulders target has been met on the SPX and Wilshire shown below.  Higher volume red candle today also a prominent shooting star.  And so if the bulls reverse this and head higher, what can I say? ...big yawn at this stage...ok whatever. You cannot squeeze blood from a turnip. How about the contrary play is that we just play this straight and we have eventual follow through, minus any new highs, to the downside at least to the January peak? Hrmmm?  Give the bears that huh? F'kin bulltard market.]
[Update 4:41PM: BIDU bearish engulfing candle. A close under the recent gap up would confirm it.]

In last night's last update, I showed the possibility of an ending diagonal triangle instead of the minor B expanded flat or Minor B contracting triangle.  Today that pattern seemed to follow through. The massive up volume 16:1 ratio gap up was closed under which, in my opinion, shows exhaustion of the near term uptrend.

This ED looks classic.  ABC internal moves and overthrow.  Price target is under the start point which is 1141.
Top of A of (Z)?
You can see each price rise was a proportion of the previous.

E-minis

E-minis have maintained an ED formation for now.

Wednesday, March 24, 2010

Elliott Wave Update ~ 24 March [Update 8:12PM]

[Update 8:12 PM:  Potential Ending Diagonal and near term wave options:

Some were asking about a possible ending diagonal in the works.  It could very well be possible on the squiggles. I show the Wilshire which is the entire market and its does show signs of pushing on prices and overlap. These are signs of a potential ED just as the DOW did back in January. But back in January it was only the DJIA that was arguably in an ED pattern. This time it would be the entire market in an ED move.

This pattern is in play if for instance, the market exhibits a higher bias tomorrow rather than more down moves to fulfill a Minute [c] of a Minor B triangle or expanded flat as shown in the beginning of this post.  So if it moves up tomorrow and "overthrows" eventually (say 1178 on the SPX)  I would have to assume its an ED move and to short it expecting a very nice price collapse as shown in red pathing.  Thats the nice thing when the market "pushes" prices continuously in non-impulse patterns. An ED is one of the great opportunities in the market with momo trading Skybots controlling the action.  Due diligence of course.

Of course the market likes to cause maximum frustration in both bulls and bears. An ED move to 1178 could be the outright top of P2 and we wouldn't suspect it for sure until 1115 is closed under (thats my opinion). And even then bears will refuse we did not hit that magic 1200 or magic 11,000 DOW.

So tomorrow is a key day in the squiggles for the near term outlook.

So yes we have options depending on what the market does:
1. More complex wave structures that bias downward could be a continuing [c] wave in a Minor B wave triangle of (Z). 1152 cannot be breached.

2. A harder down waves tomorrow could be a bearish [c] wave in a Minor B expanded flat. Prices will go under 1152 in the near term in this case but perhaps not close under 1150.

3. If the market pushes up tomorrow in an a-b-c type move so as the Minor B triangle doesn't look like its panning out, then we could have an ED pattern in play. Perhaps an ED for Minor A of (Z) or something much more significant (P2 itself). In either case, prices should move down rapidly after it peaks to under 1141 on the SPX.
We'll probably know a lot more by morning as the e-minis will help show whats happening.
And this would approximate an ED on the SPX. Of course its going to be arguable if its a (bullish) triangle or not! NUANCE REQUIRED LOL Why do I show this stuff? Cause this is the kind of wave computations I make on a constant basis when looking at squiggles real time. I don't daytrade generally, but sometimes a pattern or price action is worth playing.

The thing that stands out I think is the market still has an open gap down from today and they can close it by forming an inverted H&S on the intra-day.

[Update 7:14PM:  The VIX daily looks like a bullish setup (market bearish). The RSI finally had a positive break over the long down trend line.

The Rate of Change (ROC) is in an uptrend showing positive divergence. Its getting ready to cross the zero line which could propel it in an upward trend as crossing the zero line often can indicate a short term trend change.  We can see in late 2010 the ROC crossed the zero line several times but it only resulted in short term selling.  The setup this time around however is more solid looking.

The Ultimate Oscillator is also ready to cross a downtrend line which would likely be a good VIX "buy" signal.

So based on the VIX's potential bullish setup, we could see some selling and the expanded flat B scenario would look more likely than the Minor B triangle.
Apple is looking pretty decent in its overall wave count.  I'm looking at $233. It could be only blue Minor 3 of (5) of [5] but on the daily chart it looks better to have the (4) placed over to the right where I have it.
http://4.bp.blogspot.com/_TwUS3GyHKsQ/S6gWB3iKU9I/AAAAAAAAEhA/s3t9ReHcuu0/s1600-h/apple.png
We'll have to stick with the ABC to P2 peak count as the primary and this is shown best on the SPX.
Zooming in a bit, so far over the last 5 days + it appears a bunch of corrective waves are playing out. The top corrective so far is a triangle because of the nature of today's complex squiggles, but that will not be known until tomorrow.
And here is the squiggles so far. No impulses up, nor down for that matter, at least not today.

So far, it aligns with a "B" wave count and I'm am guessing triangle or complex correction at this stage. An expanded flat is still on the table too http://4.bp.blogspot.com/_TwUS3GyHKsQ/S6lzJpMOzqI/AAAAAAAAEh4/KYeFnEMfCqw/s1600-h/spx.png  On some indexes it may be better to call it a wave [iv] or 4 count.  In any event, it implies the last major consolidation period of P2 prior to final move higher.

A close under 1150 would get some bearish attention for sure so I am not married to this count. But alas, the waves do not yet portray that happening.

E-minis [Update 1:45PM]

[Update 1:45 PM: So far the SPX has been tracing complex intraday squiggles. Its way early in the game here, but a giant B wave triangle is on the table as a possibility.  In other words, unable to make new highs and in need of consolidation, yet unwilling to sell-off.

We'll see how today goes. If the waves stay in a complex manner neither looking impulsive down, nor in any kind of clear structure up, its usually some form of triangle. And if we are looking for a Minor-sized triangle (usually weeks) then its a lot of days strung together.

So we would be in a running type-triangle and the [c] wave cannot be lower than the [a] wave by rule. [c] waves in triangles are usually the most complex.

Just something to keep in mind. Also there is a H&S pattern in play.

Also, Dollar made a new high overnight

A nice article by Todd Harrison over at Marketwatch:

Tuesday, March 23, 2010

Elliott Wave Update ~ 23 March [Update 10:10PM]

[Update 10:10PM: This SPX chart shows the squiggle possibilities.  I propose that the market is in a big Minor B wave expanded flat and that the [b] is almost peaked.  If for no other reason, the inverted H&S target is met at 1178. This is also where (c) = (a) and the squiggles look good in that regard.  It also would make sense if the market gets slapped down here once last shot (too much bullishness) and slightly falling back under 1150 intraday after a 2-3 day selloff.  Bullishness is certainly high in  any number of things you care to look at.  There is almost a certain arrogance being displayed.]

The expanded flat makes sense here as a B wave. It allows a "correction" to occur in prices that actually makes a new high (it did today) and the [c] wave sell-off would allow bullish sentiment to bleed off a bit yet the market maintain the 1150 breakout spot.  As long as the market doesn't close beneath 1150, it can certainly dip below.  So even a 30 point SPX drop can be very bearish yet the market will sustain the 1150 breakout.  The market takes care of  short-term excessive bullishness yet maintains the 1150 breakout (as long as it closes above it).  Anyways thats my thinking  here. Then if a C wave of (Z) launches, the market will be in its final strides for the last intermediate ZZ. How high that can go the market will decide but a Fibonacci relationship to A is seems likely.]

This sentiment gauge chart is about the highest on the NASDAQ since 2007. http://www.market-harmonics.com/free-charts/sentiment/nasdaq_sentiment.htm

We can know if this pattern is correct or not. Obviously a big move up tomorrow and then sideways could mean a wave  (iii) and then (iv) and its not a ZZ up from 1152 as I propose here and that means some other impulse pattern is playing out. However this is a particular ZZ pattern that looks very familiar to me.  A decent reversal should happen soon after peaking if my squiggles are correct.]

[Update 8:43PM: Interesting poll in which a whopping 79% of Americans think the economy could "collapse". http://www.foxnews.com/politics/2010/03/23/fox-news-poll-say-economy-collapse/
The term "collapse" is a P3-type term. It is a term I associate with the realization that once a Ponzi scheme is fully recognized for what it is, there is no "upside surprise".  In other words, you can be bearish 100% and still your going to pull out of the Ponzi as fast as you can.  There is no wonder why people feel this way. Debt is out of control. The term "trillion" now gets tossed around like a bean bag. People are aware of the danger of out-of-control debt.

Its amazing that even after 12+ months of market rally and a massive social mood rebound (VIX almost under 16 folks!) they realize that things are still the suck and we are living an illusion.

No family likes debt hanging over their heads and now they don't like debt hanging over their governments heads (and many now have both to worry about). They now are starting to feel that loaded gun of government debt pointed directly at them....for surely they will be taxed.  Let me ask you this? Is economic activity going to pick up? Is social mood going to go positive and be economically fruitful under these conditions of debt overhang and threat of government ruling and interfering over every aspect of your life?

Now the real question is when do they associate the danger of debt with the marketplace?  When do they recognize that the banks are playing Ponzi fire with the financial markets? So far that hasn't yet happened.  Too busy with "earnings" and P/E ratios and 5.8% GDP growth numbers (which are bull also because we borrowed all of it) and economists telling us everything will be alright (yet ignoring the debt!).

When does social mood say "enough!" and begin to pull what they have left so as to keep the government from getting the rest of it?  Health care signing was the "proof" that government is capable of reaching deep.

The people will soon come to realize that nothing is off limits. And thus hunker down even more and cash out while you can. And social mood is nowhere near the bottom in my opinion.

We haven't yet begun to riot.

P3 is no mythical unicorn! It exists in the waking conscious of almost every American.  They haven't yet fully acted upon it yet, but the time is coming.

[Update 4:16 PM: Some supporting evidence that this is a Minute [b] wave of Minor B is that not all indexes registered a new high. The transports seem to be tracing ABC's and didn't confirm the "breakout". I really have a feeling the market is getting ready to be slapped down for a few percent loss.]

I'll stick with the SPX count I showed last night http://3.bp.blogspot.com/_TwUS3GyHKsQ/S6f3cND5L9I/AAAAAAAAEgg/qsxPH_Eg-KE/s1600-h/spxDAILY.png

I have the move up from yesterday's opening low as a Minute [b] wave (a)(b)(c) formation zigzag.  This implies a huge down move is coming in a [c] wave of Minor B back to under 1150.  This should be a very bearish sell-off.

The inverted H&S target from the February low is 1178 for the SPX. So tomorrow we could see some early jostling at an attempt to take prices higher. But if this overall count is correct, a big sell Minute [c] should be coming. Overall the count feels right at the moment.  The intraday squiggles of the last 2 days look like "threes" as shown in the Wilshire count above.

E-minis [Update 3:30PM]

[Update 3:30PM: I'm looking at this as a [b] wave in an expanded flat for Minor B of (Z)