Custom Search

Tuesday, June 21, 2011

Elliott Wave Update ~ 21 June 2011 [Update 10:24PM]

[Update 10:24PM: This next chart is going to seem to be a "duh" chart but its still important to really understand what it means.  I have learned that we can come up with the most imaginative counts possible but if the counts violate what the market internals are saying, then its a low(er) probability count.

For instance even though I have a possible bear count posted that supposes today's proposed kickoff day will and can be reversed in short order (as in what happened last week), intermediate term sentiment measures are definitely not on my side and are instead still in extreme bearish range.   So that makes the down count a lower probability in light of today's market-bullish kickoff up candle and sentiment data.

In this algo-computer run market, they take all what the data internals are telling them and price action and produce the next probable event.

Can the bears win the day? Yes of course they can but they must, as a matter of price, reverse today's buying pressure and overcome it with even more selling pressure.  Now the evidence suggests that buying pressure waned as we went into the 1258 low and the final spasms of hard selling pressure waned even further from Thursday to Monday.  Thus today saw nothing but up for the most part.

This is one reason I got bearish last week when the apparent kickoff day of last Tuesday was completely reversed by COD on Wednesday. However selling did not follow through.

On the flipside we have not had a follow-through up day to today and we must see if we get one which is important. For if no one is interested in buying anymore and today was a big squeeze, we can reverse this kickoff day.

So again, we are sort of at a crossroads here. For the bears to win the day, they must simply reverse today and "nullify" it as a kickoff day AND they must assume intermediate term bearish sentiment does not matter (which of course it does).  If the bulls can continue buying pressure - and produce some follow-through - then thats a bear-killer.

At the moment, due to today's price action and market internals, the triangle count, as per probability, runs higher than the down count.  At least in terms of an "upleg" to some higher price.  And for now that might be next resistance at 1311-1312 I suppose which makes any bear count problematic which further increases the bull count probabilities.

Thats EW counting in a nutshell. Its not perfect but using sentiment data, wave patterns and price action, we come up with a count that matches the highest amount of probabilities at the moment.  And you have to revise every single day because ignoring a kickoff day - or at least not strongly considering it - can be painful.

The good thing for bears is that we are back up at a point which may produce another round of bearish selling. So we'll find out how hard resistance turns out to be.
[Update 9:38PM: The NYAD count has formed an important channel line and pivot low.
[Update 8:26PM: I might as well update our triangle roadmap.  Wave [d] should be a 5-3-5 zigzag and have a target of at least 1327 SPX.  I have it in wave (a) of [d] at the moment.

I would suspect if we challenge the highs at 1370 SPX, we would see some intra-market divergences such as a local DOW theory divergence (to match a longer non-confirmation or perhaps the NASDAQ or NDX fails to confirm something along those lines.

1376 SPX comes to mind. It is 118 points from the [c] wave low.  This works nicely for those that consider 1258 the proper orthodox Minor 4 low that way 5 = 1 (118 points). No matter, it all works.

I would favor the market making a high on another 3 wave move (from 1258) just to screw with our heads again.  But the triangle would explain it nicely.

Obviously this projection is quite ambitious, but IF its a triangle, AND Intermediate sentiment indicators wish to work toward a bullish state again (and this is also a key), AND today was kickoff day for the final run-up(s) then today's candle shouldn't be closed under until (C) is complete.
In my estimation we have had only 3 waves off the 1370 high to the 1258 low.  We need 5 waves down to confirm a larger trend change, or what we propose could be the start of the next major leg of the bear market sometimes known as P[3] down. EW rules does not allow overlap between wave 1 and 4.  To achieve 5 waves down, the SPX requires a lower low under 1258 prior to any price breach of 1311 SPX.

Tuesday of last week, the market had an apparent kickoff day on solid internals for what I propose was a [d] wave up of a large Minor 4 triangle.  The next day that kickoff day was reversed and closed under.  That was bearish technically but it has turned out to be only temporary.  Selling pressure eased as the 200DMA was hit. The 1250 pivot was not challenged. Buyers came in.

Now today another apparent "kickoff" day up candle has been painted with just as strong market internals as last week. It makes sense that if there was to be a [d] wave kickoff day this would again be it.

The premise of a kickoff day of a [d] wave is simple: This candle will not be traded under until Intermediate (C) wave is over and headed down.

I show the Wilshire for form but the Fibonacci [d] wave target for the SPX would be .618 x [b] = 1327 SPX or so.

The first step required for the bears is to reverse this bullish market internal day and close the tape under today's candle  If that is accomplished that opens the door to further selling.

What are the odds of that happening? Well it happened last week didn't it? So it can be done. The bears need a downside surprise and fast.  We await Greece's vote.

The Wilshire still has its virgin space intact.
A breakdown of the SPX via bear count:
And Minor 1 overall. Again, I only have this as 3 waves off the top.
As I have been harping, most Intermediate-type (those that track weeks/month time frames) sentiment data is extremely bearish. That is why I suggested the bears have a small window of opportunity to force some real panic selling to much lower prices before Minor 1 bottoms and the Intermediate indicators get squashed.

If the market requires a significant relief of excess longer-term bearishness, it will take a lot more price and time to do so. That is why the Minor 4 triangle is favored in that effort if thats whats happening.

Again, in my estimation, and according to the rules and guidelines of wave theory, the bears need an outright reversal of today, and quick, in order to maintain control of the Intermediate term trend.  Otherwise the market will begin to correct Intermediate term sentiment indicators and thus the triangle count, and a challenge to 1370 highs is not out of the question.
blog comments powered by Disqus