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Tuesday, June 26, 2012

Elliott Wave Update ~ 26 June 2012

We have 5 waves down from the SPX 1422 peak.  After the 1266 SPX low, the market made a counter rally move in 3 waves that peaked at 1364. The move since then is best characterized as at least 5 waves down. The rally over the last 2 days has been choppy which implies the main trend is still down.

Primary count does not get too fancy with the squiggles here as its fairly straightforward for the moment on both the large and medium scale so thats what we go with.  Some have suggested that Minor 2 has been too short in time and that an "X" wave is occurring and the market will trace another corrective pattern as part of Minor 2.

My response is that the retrace of Minor 2 up was a Fib 61.8% which is more than healthy and that the "time" factor works well enough at least for the DJIA.

If the market requires more time, and/or price for Minor 2, a double zigzag up would be the likely pattern.

However, sentiment is a very lagged and mixed bag which favors the bears due to the current wave structure of 5 waves down at multiple degrees of trend. The market never did panic on the selling since 1422 SPX high. This implies that there is "robust" selling energy that exists for Minor wave 3 down and that its just a matter of timing.

For instance, via Sentiment Trader, their proprietary indicators show only 10% buillish extremes versus 4% bearish extremes. Typically an intermediate "bottom" of significance would show over 30% (sometimes 40%) bullish extremes and 0% bearish. Clearly that is not the case and the market is more at a neutral stance than not.. So the sentiment indicators do not favor the bulls in this case , neither short, medium or long term.

So the wave pattern is what we must go with. 5 waves down at several degrees of trend we must assume a bigger selling pressure of a Minor 3 is around the corner.

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