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Wednesday, December 14, 2011

Elliott Wave Update ~ 14 December [Update 8:55PM]

[Update 8:55PM: I haven't given up on the (b) wave count.  This count below is an expanded flat - zigzag - zigzag combination. But the bleeding has to stop sooner rather than later.
[Update 8:22PM: A couple of my favorite Intermediate term sentiment indicators via Sentiment Trader. These are a blend of various market sentiment data like put/call data and sentiment surveys.

The first is called...Intermediate Term Indicator Score. Closer to a bullish extreme than not and this includes today's data.
The next is called the Composite. The last time I showed the Composite chart on the 26th of October I noted that the 21 day moving average portion of the indicator was still probably too low and needed more time.  It has had that time.
Both charts are well off their lows. This Minor 2 has done its job of shaking out extreme bearishness.  These can certainly go higher but they look good as is.

The next chart is the CSFB Fear Barometer. Its not very fearful yet which is supportive of a yet-to-come (c) wave of [y] of Minor 2.

The DJIA futures chart, all-hours, shows the recent high was higher than the October rebound high.   This is proof that Minor 2 has existed at least for over 2 months in time.  That time is sufficient compared to the 5 month decline from the May 2011 high.
Thus we can probably say that Minor 2 has existed at least to the recent 12257.41 DJIA high.  The futures chart above kind of makes that point easy to make.

Minor 2 is thus labeled a "double-three" corrective. Otherwise known as a combination. Combination correctives exist for 2 reasons. Either price retrace was not sufficient, or time was not sufficient compared to the previous price drop of wave one.

Prices retraced quite high and quite fast for Minor 2 when the SPX went from 1074 to 1292 in a matter of days in a 3 wave corrective pattern. Thus we had 2 requirements in place at that time: 1) price 2) waveform was a "three" wave move.   The only thing that was lacking was time.

In theory then the market made another "three" move down to 1158. This was known as an [x] wave, or a connecting wave in a double three combination. [x] waves are typical zigzag moves and this was no different.

The only thing left was then for the market to trace out the final "three" pattern and I theorized it was likely to be a zigzag.

However this zigzag was not needed for price - merely time. The first zigzag's 1292 price high was certainly an ample price retrace for a Minor 2.  The second zigzag would however fulfill the time requirement which was the only element missing for Minor 2.

Although a typical "double zigzag" would have its second zigzag end higher than the first zigzag, this was usually because double zigzag patterns were the market's choice of preference for achieving a correct price high if the first zigzag was "lame" in price. But this was not the case. In this instance the second zigzag was not needed to fulfill a higher price (although it almost did on the DJIA - and did on the futures all-hours), merely time.

The market is starting to slip under major support and its beginning to impulse down. One would have to conclude we could be in the beginning stages of Minor 3 down with a price target of well below 1000 SPX.


Everyone wants to know if we'll have a Christmas rally in a low volume environment that sometimes occurs at end of year. I say there is still a decent chance its just taking its time about things.

John, a regular reader pointed out the big apex forming.  This may be a logical place for a (b) wave to bounce from.

(b) wave of zigzag [y] is still on the table.
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