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Monday, January 23, 2012

Elliott Wave Update ~ 23 January 2012 [Update 9:03PM]

Update 9:03PM: Dollar long term weekly chart is in excellent position to eventually take off in a Primary wave 3 of (3) of primary [1] of cycle wave III up.

As a side discussion, I always ask myself why people conclude the dollar will collapse as more and more bonds are issued. Would not the bonds themselves collapse first?  And if the bonds collapse first, would that not make the dollar attractive?

Nobody ever seems to think this thing through. But if they (Fed, corporations, government, etc) keep issuing more and more debt, sooner or later interest rates will go up as supply overwhelms the current Ponzi schemes in place (shuffle-the-money-between-empty-pockets-game). And since the entire corporate/governmental bond scheme is leveraged beyond hope, any significant rise in interest rates will cause massive bond defaults. This will cause a demand in payment in dollars.

And if the credit bubble finally busts once and for all (which it will), then the dollar should do pretty well as there will not be inflation, but deflation.

Regardless, the long term dollar chart is in excellent position although I think this wave [ii] pullback needs to cover that gap up.
Update 8:37PM: Via Sentiment Trader, the CSFB "Fear" barometer is an example of how things are getting toward a bullish extreme, but may have more room to run and even diverge prior to a top.

The indicator chart is not quite at the 28 - 30 level where the last 4 price peaks in 2011 occurred.  (But it need not be of course!) Note the barometer topped out just before prices in each case with the 1370 top having the largest time between top-out and actual price high.

An extrapolated conclusion here is the CSFB Fear barometer for instance might move into the 28-30 zone and peak just prior to prices peaking.  It will probably take even higher prices to produce those final moves on the baromoter. So that may support a Minor 2 topping in the 1334-1356 range. Not what bears want to hear, but its just an educated guess based on this top alt chart(s) I posted tonight.

Also note how the pullbacks toward 1158 SPX and 1202 SPX, the barometer fell quickly to the 18 - 19 range levels and was suggesting the current rally legs in each case.

Update 7:38PM: Here is the top alternate count in which bears get skewered slowly for a few more weeks.  Note that, like many bear market rally waves of any size since 2009, the wave one is the proposed longest wave.  This count wave v projection happens to coincide with 1346-1347 SPX.

Keys to the count is 1) major support holds (lets say above 1295-1300 SPX to be charitable)  2) wave channel holds.
Update 6:45PM: Dollar still has that big gap up. A closure of it would make for a nice wave 2 to form a huge series of ones' and twos'.

Update 5:10PM: Here is that SPX chart posted again to get a better look at internals.  Also note that this count is invalid if prices get higher than 1325.6 as wave iii can never be the shortest.
There are a few areas I would like to hone in:

1292 - 1309 represents the buffer zone for the 1300 SPX level.

It was surmised that Minor wave 2 up would more or less "die" in this resistance zone and that it would not be held for support in which to launch another series of assaults on higher prices further above.  Today was the first serious test of that price zone as support.

As is often the case, to take a major resistance zone such as this, prices lurch high above and then come back down to test the top of the zone for support. Today was the first serious test of this zone and it held as support.

If this resistance zone fails to support prices, then prices are likely starting Minor 3 down.  See SPX squiggle count below.

If this resistance zone successfully supports prices, then prices are free to lurch ever higher toward previous pivots such as 1347 SPX. See Wilshire squiggle count below.

The current wave up starting at 1202 SPX is in a channel up. As long as this channel remains in place, one has to respect the potential for higher prices.  Once the channel breaks, we can surmise the wave structure - as far as from 1202 SPX start point - is struggling for either a significant local top or of course something far  more substantial.such as Minor 2.  So far the channel is well intact.

The first count supposes that Minor 2 is very nearly over and that "support" (and the channel) will soon fail. UPDATE: It would need to fail pronto for this count to be valid as wave iii can never be the shortest.

The second count implies that prices will hold support and work their way higher. In this instance, I used the Wilshire 5000 to show the top alternate count.  Minor 2 would finish much higher, with a preliminary target zone of 14000 - 14100. Note that the May 2011 top occurred at Wilshire 14,562.  So 14000 can still be considered a wave 2.

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