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Tuesday, February 15, 2011

Elliott Wave Update ~ 15 February [Update 9:37PM]

[Update 9:37PM: The NYAD chart looks tired.  What would it take to throw things really out of whack from a bearish perspective? Well take a look at the (A) (B) (C) pattern of the rally and look at declining volume ratios for each (A) and (C) leg.  If there were to be a sustained day tomorrow or the next day of over 10:1 up volume ratio, or something even more amazing, then we would have serious doubts in the bear count.

I am not saying it cannot happen, but I am saying that there certainly is a bear case to be made particularly since a giant (A)(B)(C) pattern is staring us in the face right after a 5 wave down pattern from the 2007 highs is staring us in the face.  Trees meet forest.
[Update 9:07PM: Prechter had a great EW Theorist today as he explained why he thinks a "third of a third" primary is about to not likely happen.  He used sentiment measures to make his case. Basically, a market that is "setup" for a "third of a third" will have low sentiment readings and catch everyone by surprise.

Well today that is not the case. We have record bullishness in equity exposure reported today

We have the Investor's Intelligence Survey with likely 75% bull ratio. We have AAII survey that has its 4 week moving average highest in 6 years.  We have Market Vane survery back at 2007 bullish levels and we have record low mutual fund cash of all-time. We have a slew of others via that I won't get into such as Options Speculation Index going off the chart. We have NYAD A/D line at a monstrous all-time high that has traced 5 waves up from the 1995 low (Super-cycle overthrow) reflective of the mania times we live in. 

Do we have a full retail contingent back in the game and what about mom and pop? I dunno, they are getting old and broke and don't care to chase the rally for the most part. They were burned 3 times now. NASDAQ, Housing and the DOW collapses.  Wall Street took their money already. 

We also have the simple BPSPX chart which is tied for the highest point ever at 88.8 (2004). Does this all add up to a doubtful sentiment setup that would support a "third of a third"?  I say it does not.  The opposite is actually happening. We have a belief in the FED not only by bulls but an entire bear blogosphere blaming Bernanke for the rally.  Its one-sided thinking, and no matter how you cut, even despite the awful mess we are in, its downright bullish considering our entire world financial system is likely on the brink of coming un-glued.

And I get jeered for pointing it out. 
[Update 8:20PM: Is that a wedge we got going on in IYR?
The monthly shows 5 waves down from 2007. It also shows a potential wedging action with prices over the last many months. That is a bearish structure which usually results in a price collapse to below where it started in this case (B).
[Update 6:35PM: Still rooting for gold to make a move toward the long term upper trendline. A blow-off panic peak that packs on a lot of upwards price in only a few days. We'll see. A break of $1308 is bearish.]
No solid impulse waves down yet and the price high of wave i of (v) of [v] has not been violated yet. So we must assume the wave structure up is not yet complete

It would be nice if the market had an exhaustion gap up tomorrow (to fill the unfilled gap down from today) with a hard reversal down after yet a new intraday high on the SPX.   That would complete the wave structure nicely.

Of course yesterday's high of 1332 would also make a nice wave 5 high as there is enough of a structure to support that count.
Proposed Minor wave 5. Its fully developed and getting piggish. A quick new high may produce a double negative divergence on the hourly RSI which would then be favorable for a hard downside reversal as long as up volume ratio remains weak.

A break of 1308 would confirm things. Indeed even a break under 1324 is to be watched.

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