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Wednesday, March 16, 2011

Elliott Wave Update ~ 16 March [Update 9:27PM]

[Update 9:50PM: McClellan's supports one of the bearish counts. No divergences just yet. Doesn't have to be but its been pretty consistent for P[2].  It is oversold but we have seen much deeper.
DJIA Price and Volume Trend long term is back below the trendline. False breakout?
[Update 9:27PM: I know the Minor 4 count looks pretty on a chart but there are a myriad of technical reasons that do not align well to keep this decline to a mere three wave decline as depicted on the chart. First, we have some bearish volume readings and breadth - likely two recent 90% down days and loss of major support. That doesn't typically sort itself out on the turn of a dime. If it did we will need a tremendous "kickoff" day somewhere soon  - say a 90% up day perhaps or close to it.

Second we don't really have any divergences on the daily yet to suggest its ready to turn up. For instance McClellan's is still pointing straight down and daily charts are pointing down and not yet oversold on the daily.

I'm not saying it cannot happen - it certainly can - but the market is no longer "cheap" as it was at lower prices in February 2010.  There is also a 5-3-5 on the weekly charts that already stands out. We have world markets that have broken key wave markers and well outside their channels which suggest that the US markets are merely lagging to the downside.

Bounce? yes lots of violent bounces.  Minor 4? A long shot.

[Update 9:10PM: And finally, our more remote alternate Minor 4 count is actually still on the table.  It will take a mighty hefty digging-in-the-heels by the bulls to turn this around and keep it limited to a three wave [a]-[b]-[c] decline. And that is what is important here - keeping it to a three wave decline, not five.

But we have seen it before back in February 2010 the market churned for days just off the 1044 low before breaking higher and then by April 2010 it was on yet an incredible run up to finish Intermediate (A) at 1219 SPX prior to the flash crash in May.

We do have a huge amount of open gaps above that are meaty bull targets. The other concern I have is that EWI officially "eliminated" the Minor 4 count pretty much tonight (well the triangle anyway).

Log scale both fills out the channel nicely and bounces off the base channel - a typical wave 4 bounce spot.
So there you have it - Super bear count, medium bear count - and Minor 4 bull count all in one update. You pick your poison.  The reason we make all these counts is so when the next set of moves happen, we already have a potential roadmap to point the way to figure out which scenario may be underway.

[Update 8:30PM: I also have to suppose also that the big bear opening the other day was indeed a "third of a third" and that the market is indeed tracing out some wild and sharp wave four events. My top count for that is posted below.

(iv) would ideally not reach the price of iv. And then (v) requires new lows.

Wave degrees are knocked down one notch to Minute size, not Minor. Problem with that is its an awful long time for just a Minute sized wave.

[Update 7:30PM: Some thoughts on the Japanese Yen and Dollar:

I think what we may be seeing in the Yen is the ultimate inflection point in Japan's long-running deflationary battle.  In other words when the Yen peaks for good, which should be soon, that is it.  The turn will go from deflationary slowly to inflationary and perhaps even hyper-inflationary.

Japan was the first market to top in 1989. It has been battling deflation off and on via issuing debt for 20 years in an effort to hide losses in the banking system. This battle has won a lot of time, but the long final act seems near for Japan. What I am proposing is that since Japan "leads", it will be the first currency to collapse in a hyper-inflationary binge.

Now don't get me wrong...I don't think this will happen overnight as these things take time. But I do propose that the Yen after peaking, will start a long dreadful decline and be one of the first major currencies to face hyper-inflation.

And what of the dollar? Well, the dollar will go through a spectacular bull run against most all currencies and the US will experience its own deflationary collapse except it will not be a long drawn-out 20 year debacle ala Japan.  Elevated social mood is what allowed Japan to drag on for many years. The US will not have that luxury now that the Supercycle bear market is in full force.

So you heard it here first. Japan's deflationary days are numbered. Their currency, once topped, will begin a long decline and likely to be the first to face hyper-inflation.

The dollar has held tough against the "basket" of currencies as we suspected.
When you see that proposed Minor wave 5 of (C) of P[2] was from SPX 1171 to 1344 you realize that Minor 5 was some 173 points long to the upside.  I ask this: If this is P[3], would not Minor wave 1 down be expected to be as least as long in points as the final wave up was? Of course it would and likely even longer.

It is from that aspect I come with my my primary wave count - the super bear count as a series of ones and twos and we have yet to have the panic wave "third of a third". 
I'll have more later.
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