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Friday, June 10, 2011

Elliott Wave Update ~ 10 June 2011 [Update 4:51PM]

[Update 4:51PM: IYR breaking down.]
[Update 4:50PM: A simple look at the weekly. The BB width is still tight we haven't even started to widen them.]
I stated yesterday that the top 2 wave counts (in my estimation) would soon be diametrically opposed to each other. In other words one count or the other will wind up looking silly.  We are likely to reach that spot early next week.

I could give you a lot of reasons for and against each count.  For instance there is no doubt that certain sentiment measures (for instance AAII 4 week average and II bull ratio) are as bearish as the lows of the summer in 2010.  That would suggest we are reaching a decent turning point (such as a [d] wave up in a triangle).  However in other measures - like the VIX - we simply are lazily plodding along - and they have much more room to get squashed or spiked.  Even a simple indicator such as the daily RSI on the SPX is not oversold to 30 just yet. And if we look at weekly candles, there is no sign of bottoming and they count certainly stack bearish!

But whats the saying? The trend is your friend - and right now that trend is down.

But in the end, price action is bearish, working off oversold as we go and the market is impulsing down in little 5 wave intra-day sequences and bouncing up on counter-trend a-b-c's. Thats whats important at the moment.

1. P[3] DOWN:
After today's price action, P[3] down moves ahead of the Minor 4 triangle count.

Lets just call the top bear count P[3] down. We suppose the market has topped at 1370 and is working its way lower in a wave (iii) or [iii] if you prefer (wave labels don't matter just yet) of a first wave Minute or Minor sized wave prior to the first significant bounce.

Market internals are creeping higher each day although the late afternoon push relieved some down pressure - still the last bounce was an a-b-c move so it implies counter-trend up. The VIX stills refuses to show any panic at all!   If the market intends to produce this panic, it will need more selling.  I suppose it will not panic until or unless the 200DMA is closed under and/or the uptrend line from the 2009 low is lost
There really is no non-confirmations between various indexes and subindexes to mark a possible big bounce spot.  Maybe we get some next week, but everything seems aligned to the downside still.
Lets face it, for this count to work, the market will need to hold firm near this range.  We are simply running out of room for this count.  I always have had the Minor 4 triangle because I felt the market needed to maintain upper support (above 1250) if it is to have a chance to make a run above 1370 again.  If the market loses 1250 SPX, then we don't have a triangle - its that simple and the count can be eliminated and perhaps Minor 4 can be eliminated.
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