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Wednesday, August 29, 2012

Elliott Wave Update ~ 29 August 2012

Technicals are anemic.  Yet prices are levitating. Zero Hedge notes the low volume situation.

The overall market has not had true a 90% up day (where stocks are 90% up volume ratio and 90% advancers vs decliners) since October 2011.  Volume is slowing to its most lowest in many. years.  A rising market on low volume is not healthy. In addition, the fragmentation between indexes, subindexes and other world market indexes is at such a wide divergence, that one need not even look that hard to see. The rally is not powerfully plowing ahead, it is fragmenting like a meteor coming back through the atmosphere.

More importantly, the wave pattern since the 1010 SPX 2010 low is in the shape of an upward rising wedge. This pattern forms when prices get compressed upwards in a pushing, ragged, non-impulsive manner. In other words, the waves do not count well as stand-alone impulses. (we can probably say that the entire rally since the 2009 low is made up of ragged waves).

This rising wedge is a result of slowing momentum.  Each successive wave leg up shows signs of lesser and lesser technical conditions. Yet prices continue to lurch on this lesser momentum. The end result is exhaustion. The fact that the wedge is over 2 years old shows that the degree of slowing momentum is of a historic nature and a very large wave degree.

There can only be one way to resolve a wedge: a price collapse from sheer exhaustion that declines in a manner that is at least equal with the total price rise of the wedge --- and thats for starters. So a rapid price decline to under 1000 SPX is to be expected in such a scenario.
Wilshire 5000:
SPX 5 minute. A very complex set of waves over the last many days. Sooner or later the complexity will end abruptly and the market will reassert itself in one direction or another. Technicals suggest that the direction will be down. However, If the direction is up, I would suspect it will be one last great lurch in the great wedging action since 2010. A "Give-it-all-you-got" moment near the very end of a long trend since March 2009. And I suspect the end result afterwards will be disastrous nonetheless.
USD weekly. Sentiment has pulled back quite a bit. Perfect setup for an eventual wave three up.

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