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Wednesday, May 23, 2012

Elliott Wave Update ~ 23 May 2012

1292-1296 SPX was the MAJOR resistance range that was frequently sighted by this blog during the October/November rally as being the last real great resistance area the market needed to overcome in order to possibly attain new highs. This zone was taken, held, and indeed the market made new highs to 1422 SPX.

With prices in reverse, this 1292 - 1296 zone - now support - is the first great major support zone that the market needs to break to the downside in order to unlock the potential of a real bear market 20% decline or more.

Having seen the market hit this price zone the last 2 days and rebound furiously each time, one can conclude  the market knows how important this level is and may try to defend it.  In other words it will likely take some work to chew through such as a Minuette (iv) or a Minute [iv] sideways wave, or it will become the basis for Minute wave [i] low on the DJIA. Just guessing here.
DJIA has dropped over 1000 points from its high in a relatively intact channel.  This indicates that it has not yet had a correction for the entire length of price drop. If it does correct the entire drop, we would call it Minute [ii].
The GDOW is one of my favorite counting indexes. A truly worldwide mood indicator, it produces excellent waves. Lets first look at the weekly:

5 waves down from the 2011 high, a roughly 62% retrace in a 3 wave move and now impulsing down again toward its 2011 low. 5 waves down suggests the 2011 lows will be broken eventually.  Also note the really big head and shoulders forming.  The neckline makes a nice bear target.
A closer look at the GDOW daily shows we haven't even identified a confirmed wave [iii] low.  With the neckline still well below, it would be imprudent to do so just yet.

1. As you can see from the 3 charts above, each has varying degrees of counts which can throw us off one way or the other if we are looking at 1 minute squiggle counts.  This is when of those times we just got to let the waves sort themselves out as they always do and maintain our general outlook (bearish long term).

2. Having said that, the BEST count that I like is the GDOW.  It has been the most consistent over a long period of time.  And as that chart says, we cannot be sure if we have found a wave three low or not. 

3.  If you're a bull and looking for an intermediate-type, multi-month low and are basing the low on an extreme of bearish sentiment, you need to perhaps look for lower prices. Why?

Well today's II report came out and its still surprisingly bullish (or at least not bearish). (via Sentiment Trader):

Bearish % certainly doesn't suggest a multi-month low is at hand or even close to it:

4. Dollar poking new highs. 

5. NYMO has worked off deep oversold (twice), yet the DOW is over 800 points from its high.

The best count may be simply that we are trying to confirm a Minute wave [iii] has finished in price. This thought agrees with both the SPX/Wilshire5000 and the GDOW so its probably the best stance to have for the short and medium term.

It could imply that the market has moved down to a new 50 point trading range - roughly 1292 - 1343 - and we'll see a hellava lot of shaking out both ways in the next few weeks. But thats just speculation. With the worldwide PONZI revealing its true self and coming unglued day after day, I maintain an overall bearish stance of course.

You know what I always say about Ponzi sentiment - there is no upside surprise in a Ponzi despite maximum bearish sentiment. Ponzi's collapse, period. Sentiment stays 100% negative all the way to the lawsuits.
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