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Monday, August 20, 2012

Elliott Wave Update ~ 20 August 2012 [Update 6:10PM]

UPDATE 6:10PM: Its been a while since I showed the long term Supercycle channel line of the DJIA.
Is the INDU wedging into the top of the channel? (Note the large Breadth Thrust divergence). If it cannot break above the channel as it did in the early 90's will it exhaust and fall to the lower side of the channel?  (the lower side of the Supercycle channel is many thousands of points away.)

ORIGINAL POST:
Robert Prechter said it best in his latest Elliott Wave Theorist:

 "I am not sure I have ever seen the technical condition of the market look this immediately bearish."

He was referring to having so many markets and indexes providing non-confirmation divergences at many degrees of trend and on many timescales.

SIDENOTE:
<-----(Click on links to left to get FREE CLUB ELLIOTT WAVE membership.  I get $3 for each member I sign up and if you go on and buy a service at a later date I get a small commission if you had become an CLUB EWI member through my links. Its really is a lot of free stuff provided no bullshit involved.)

Back to the markets. I have never seen a bearish wedge potential as large as we have right now in the markets even if the indexes DO NOT confirm a "higher high", the wedge is there regardless. It is in place. Unable to confirm a higher high makes it even more bearish.

Technically, the internals "match" what we'd expect in a wedge. Each up leg of the wedge sports lessening momentum measures.  We could even expect to see sentiment measures diverge at the top. After all a wedge is "heavy" price action when looked at in context of the overall wedge.  So sentiment does not need be the most absolutely exuberant at the top of the wedge. In fact I would expect it not to be.

The S&P500 sports a lesser RSI peak, OBV divergence, a declining advancer vs. decliner, lesser overall volume just for starters.

NOTE: SPX count shown as a triple zigzag in this chart.
SPX shown as an (A)(B)(C) rally:
SPX weekly sports a double negative RSI divergence and lesser volume.
Ultimately the Wilshire 5000 is the final arbiter in my view. Note the subwaves seem almost finsished.

And investors are more than comfortable at the moment. QQQQ liquidity premium via Sentiment Trader. The most comfortable since the 2009 low. 
This "comfort" with the market is reflected in the low VIX hitting the lowest levels in many years. Depsite the "wedge" action in stocks!
Yet the CRB has topped out long ago:
The GDOW actually looks nice labeled [1], [2] when compared to how it rose to its 2007 peak.
Stocks in a wedge? Bonds in a wedge? Whats going on here?
If thats the case, King Dollar will win!
Conveniently the NYAD count looks "finished" with the end of the wedge in the markets. And yes the NYSE sports a double negative divergence. Are both a coincidence?
Long term INDU count. REMEMBER NO MATTER IF ITS PRIMARY WAVE [2] OR A CYCLE WAVE B OR X ITS ALL THE SAME - A BEARISH "THREE" SINCE THE 2009 LOW. 
Even Apple has lost its impulsiveness despite a new high. Looks almost like an expanding diagonal triangle at the moment.

CONCLUSION:
More and more likley does the market look like its setting up for a major crash that will dwarf 2008.  If this is a WEDGE, a crash is almost assured since wedges signal exhaustion in price action. 

After hitting above 1200 SPX in April 2010, the market has managed to add a mere  200+ points in 28 months. And people call this a bull market?  Thats 7 points a month since.  Yet the market psychology is more than ripe to take it all back and more in a flash. Trapping as many investors as possible is what wedges can do.


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