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Thursday, April 21, 2011

Elliott Wave Update ~ 21 April 2011[Update 5:20PM]

[Update 5:20PM: Update on the Supercycle channel
In early 2010 I proposed the market was backtesting an 80 year channel line of Supercycle degree from 1930ish.

Recently, EWI picked up on this theme and painted their channel in a slightly higher spot than I had originally.

After seeing their channel, I evaluated mine and realized I probably had it wrong. Since then I made a new channel (which was higher than EWI's) and have been using that.

Here is my current proposed supercycle channel:
And here is how today ended against that channel:

Primary count is that the market is tracing a Minor wave 4 triangle pattern. This is highly speculative because triangles do not reveal themselves typically this early.

The market has primed itself to gap over 1339 resistance early Monday in a final spike of wave (v) of [b] of Minor 4. So we have no reason to doubt it won't do just that.

There are certainly other counts to be reckoned but I suspect it will be no easy trek for both bulls and bears over the next weeks. Why?

Bulls are currently in "control" but I suspect they will be trounced a bit once again very soon.   And thus bears will again get excited in a complex wave [c] and bulls somewhat deterred.  Then wave [d] up will again rankle the bears and wave [e] will get everyone (both bulls and bears) thinking the trend is finally down only to have a final thrust upwards that exceeds expectations of the entire market. That is the psychology of a triangle move.

Is it too early to predict that? Probably. But I have a bias toward that 6.5 SPX gap getting closed and if that is closed and it is "not a reversal" the only thing that makes sense is a triangle wave [c] down.

We also have the "VIX setup" in which volatility has collapsed too hard too fast.  As soon as it closes back inside its BB, we could have a bearish wave come upon the markets which may just be wave [c] down of Minor 4 triangle (or flat).

So that is the general Elliott Wave thinking at the moment. Highly speculative short and medium term.  SO take it with a grain of salt.

The thing that goes in conjunction with this thinking is the current extremes in progress. Obviously Gold and Silver, Oil and the dollar (down) need to finish their current extreme runs. The proposed runs are all a long term extreme run on each.

After these runs have exhausted, they should turn the other way. Equities may lag these turns.  So the current extreme situations in each (Gold, Silver, Oil, Dollar, Treasuries and equities) may in fact need a few more weeks or even a month or 2 to exhaust.

Figuring out when exhaustion sets in is more an art then science. It will happen though, you can be certain.
And then everything will not typically turn at once. For instance dollar may bottom first, commodities peak second, and equities peak third. There is no hard rule as we must just take each's wave pattern into account. 

Hence the equity Minor 4 triangle may be the best "predictor" at the moment for taking into account everything and giving everything the "time" it may or may not need.
Silver sentiment is dangerously high.

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