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Wednesday, April 13, 2011

Elliott Wave Update ~ 13 April 2011 [Update 10:24M]

[Update 10:24: I'm beginning to believe in Prechter's idea of a cycle-sized wave I up in 2008 instead of Primary-sized..  My cycle-sized wave II would be a flat with an expanding ending diagonal for the [C] wave. Not real sure on that, but technically and sentiment-wise, what the heck. Sentiment is reaching historic extremes  (despite the fact that prices are still above 2008 highs.)  And wave (5) is price-limited. In other words it cannot be longer than wave (3) of [C} of II. So therefore we have a "marker".

[Update 8:48PM: The issue of a truncated Minor 5 is an issue for the overall EW count of P[2]. We have no crystal ball and all we can do is take it one wave at a time. For now we have 5 small waves down lcoally on the SPX which is a good start.

NON-CONFIRMATIONS
The Wilshire5000 is the total market and we came within 8 points of a new high. Truncation-worthy? I certainly would think if any major top should do so it would be P[2]. We have new highs in certain indexes above 2007 highs (Russell 2000) and new highs locally in others (DJIA). Non-confirmations are to be expected across the board.

I mean we have non-confirmations with the 2007 highs, we have non-confirmations with the 2010 highs (like BKX) and we have local non-confirmations with the earlier February highs. We have non-confirmations with foreign indexes. We have a hodge-podge of market conditions and if one looks at what is staring us in the face, we have record non-confirmations between indexes, markets, foreign markets, commodities, FX, between decades, years, months and weeks.

In short, we have a plethora of non-confirmation to be found everywhere across many markets both foreign and domestic, assets classes and years.  My take is that it is all extremely bearish.
The defense rests.

[Update 8:27PM: I don't like to get in the habit of posting charts from Sentiment Trader http://www.sentimentrader.com/ but since I promote their services at the same time I think its ok once in a while particularly when we reach certain extremes in a popular survey such as Investor's Intelligence (which the data is available on Thursdays anyways)

But all I can say is the bears are nowhere, and the bull ratio is extreme.  Risk/reward to go long big is not very good at the moment.  Particularly for those retail mom and pops to "get back in" in their 401K or what not. But that is indeed what seems to be happening.

ORIGINAL POST
We got our 5th wave down on the SPX as suggested in yesterday's update. The opening today looked like that would be an impossibility as it was a very aggressive open. Yet somehow the wave i price low was not breached in the SPX and the wave iii price low was met and exceeded (barely) as required by EW theory.

So the primary count shows five waves down. This implies we need at least another 5 waves down in the least.

If the market has topped that next five waves down would be a more powerful wave (iii).
If the market has topped, we may have seen a truncated high in the SPX. You can thank the banks for that condition.
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