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Wednesday, December 28, 2011

Elliott Wave Update ~ 28 December 2011

The TRIN on the NYSE ended today with at an extreme oversold 5.29 reading.  The NASDAQ ended oversold at about 2.57. Based on that alone, one could surmise an oversold bounce was due.

If it weren't for the severe oversold conditions today produced and the light volume week in store, one could strongly lean toward calling yesterday's 12,328 DOW peak the top of Minor 2.  And perhaps it is on the DJIA. But the wave i of (c) price was not yet breached on any index (DJIA, Wilshire5000 and SPX specifically) so we can give the wave count the benefit of the doubt and call today's pullback wave iv of (c) of [y] of Minor 2.

Under that count the market has one more small wave up to complete Minor 2. But these "final waves" rarely seem to complete so I won't hold my breath.  Regardless, I wouldn't be surprised at an oversold bounce "effort" just based on the oversold closing TRIN.
TOP BEAR COUNT:
The top bear count has Minor 2 topping out yesterday at 1269 on the S&P500 and 13,315.36 on the Wilshire 5000. The Wilshire just missed my minimum target of 13,336 but it was sure close. The SPX reached my minimum double ZZ target of 1269 SPX.

Top bear Wilshire count simply has Minor 2 finishing a second zigzag that not only truncated from the first zigzag, but truncating on wave (c) of the second zigzag in regards to wave (a). If this "double" truncation is true, it portends a very bearish Minor wave 3 down should occur almost immediately.
This would be the Wilshire squiggle bear count: Wave i price was not yet breached so today could be wave iv low. But it needs to rally quickly to prevent a wave i price violation.

CONCLUSION:
Overall, intermediate term sentiment measures have recovered more than enough to complete Minor 2.  The  market seems "tired" and ripe for Minor 3 down.  Whether or not that happens immediately or after one more lurch attempt higher above 1269 SPX in a final wave v of (c) of [y] of 2 remains to be seen.

But it is time to start taking a very bearish stance since the primary count has us on the verge of Minor 3 down with a target well below SPX 1000. I was cautious in early October due to the "time factor" of  Minor 2 being so short as compared to Minor 1. But the time factor has now been met very adequately.

And to be fair, when I posted "lets call Minor 2 high at 1292 SPX and see if it can be beat" has actually also held up well. Certainly 1292 hasn't even been challenged on the SPX although the DJIA did manage to make a new price high above its October high.
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