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Thursday, February 24, 2011

Elliott Wave Update ~ 24 February

EW theory is about applying the guidelines of wave formation, sentiment, and technical measures into a primary count.  The best count is one that applies the most guidelines.

I have a squiggle chart utilizing the SPX and lets review the guidelines for why I have it labeled the way I do:

1. Channeling.  It channels fairly nice and wave v stops almost in the middle which is typical.

2. Sharp wave two.  Very distinct wave ii in this case. Previous selloffs in the last few weeks lack this characteristic.

3.  A breakaway wave iii.  In this case the subwaves count nicely in my "virgin wave box" as a third of a third wave.

4. Selling most intense in the suibwave [3] of iii. This too is an ideal situation. Thats why I mentioned the other night that selling had intensified at the close (meaning more selling to come at least for a wave five)

5. Fibonacci expansion ratios.  Wave iii expanded a nice 1.78 times wave i.  Wave v almost exactly equals wave i making the ratios very ideal.

6. Selling pressure subsided on wave v down versus what was in wave iii and fear (VIX) was lessened. (However sentiment measures should be most extreme at the wave v low which I am sure they were)

7. Wave iv alternation from wave ii. I labeled it an expanded flat particularly since [B] of iv was a three wave move. I also figured the wave iii low was a "thrust" move out of the sub-triangle.

8. Technical divergence (MACD, RSI, etc) on the wave v low and non-confirmations by other indexes.

9. (added) Check out the Fib alignment. 38% at wave iv high, 62% at wave i low.  
I'll have more later.
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