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Thursday, April 7, 2011

Elliott Wave Update ~ 7 April [Update 5:49PM]

[Update 5:49PM: Much ado about the European Central Bank raising rates today before the FED. Many pundits wonder when the FED will. This chart below is about all you need to look at to determine the answer to that question. (and the answer seems to be no!)
[Update 5:26PM: Here is a bearish technical argument I like to use: The Price-Volume-Trend indicator juxtaposed against the DJIA of the past year or more. We have a significant triple negative divergence occurring. If your in the bull camp this would fall into the "does not matter" category line of thinking.

I rather think it perfectly supports the notion of a waning rally and perfectly fits a counter-trend (A)(B)(C) pattern. I give this chart more credence than all the bullish TA reasons I listed at the bottom of this post combined.

The market has been tracing sideways in a fairly narrow range all week. We expected this as our primary count is Minute [iv] of Minor 5.   Early in the week I charted a potential wider up channel for Minor 5 and the market has finally moved over and fulfilled the channel.
Now all we need is the final wave to complete the pattern.

I've seen an awful lot of market analysts lately come out recently proclaim that this bull market is not likely over. Their arguments are based on some or all the following points:

1. Advance/decline line shows no local divergence and keeps setting new highs.   Herd says: "We should see divergence"

I say: This is not always true. Divergence is nice, but not required.

2. Herd says "Volume doesn't matter"

I say: Ok so why must you feel compelled to point that out?

3. Herd says "Topping is a process and we are not there yet."

I say: Was the 1987 top a "process"?  Was 1929 for that matter?  How much of a process is required and is it defined?  

4.  "Small caps are leading the charge still, they always top out first."

I say: Is not something that is wildly viewed in the market as "correct-thinking" bound to fail sooner or later? Besides who made that small cap rule anyways? Didn't the NASDAQ make the final high in 2007? Did that matter? I say its bunk.

5. We need to see a large intraday-reversal. Or if your Richard Russell, market tops don't end on intra day reversals.

I say: Bunk to both. So which is it?

6. DOW Theory is still bullish.

I say: DOW theory is nice and all, but DOW theory is no replacement for EW theory, it merely supplements.

My larger point here is that I sense perhaps a growing herd mentality concerning Technical Analysis and why it points bullish.  And it is coming toward the end of a long period of Fed-worship. Fed worship is perhaps growing weary to many market bulls and there is the threat the Fed will pull the rug out from liquidity.

Hence the long-running Fed-worship seems to be slowly replaced with technical reasons on why the market must keep going up.

Now perhaps they are correct. I don't have a crystal ball, however I will point out that there are signs of a TA consensus in bullish TA and its not without coincidence that Fed -worship (the previous reason given why the market went up) is growing weary and there needs to be a new reason to continue to be bullish.

I mean you have retail guys (no slur intended as I am retail too!) doing this TA work now and pointing out the same things. Are they all correct? Am I way off target here?

I do also fall into those kinds of traps I must admit. But my final point is that this is an EW theory website first and foremost.  And there is a GIGANTIC 5-3-5 zigzag that is nearly going to hit a perfect (C) = .618 (A) target.
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