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Tuesday, January 31, 2012

Elliott Wave Update ~ 31 January 2012

Key price zone has held again.

E-minis


Monday, January 30, 2012

Elliott Wave Update ~ 30 January 2012 [Update 5PM]

Update 5PM: An updated TLT chart. I am longer-term bearish on TLT. But it may need to finish up a wave 5 high first.  There could be a [w]-[x]-[y] structure going on at the moment.  The only thing required is a new price high for wave 5.


ORIGINAL POST
The wave structure since the recent 1333 SPX price high to today's low counts best as a 3 wave structure for now and that makes it a corrective structure.  This fits into the idea of a wave iv of (c) of [y] of Minor 2.

On the Wilshire 5000, the "virgin wave space" is still not breached.  It would be preferable - if this is wave iv - for this space to remain unscathed by any further price retrace. Therefore, again - if this is wave iv - then today's low was likely the price low of the wave iv.
SPX 10 minute:
Some updated Fib targets for the SPX wave v price peak based on today's price low.

If wave v = .618 x wave i = 1351 SPX.

Since wave v should finish higher in price than wave iii (1333 SPX), then our updated wave v target range is 1334 - 1351 SPX.

BEARISH CASE:
The best bearish case is that a series of "ones and twos" has traced out and tomorrow/Wednesday will see a breakaway down hard beneath 1300 SPX support in a "third of a third" wave down.  In other words, if it happens, you'll know it when you see it. This is the best bearish alternate count at the moment. 


Wilshire hourly chart shows a very neat trendline created at the last price peak:

Sunday, January 29, 2012

E-minis

Challenging support

Dollar

Friday, January 27, 2012

Elliott Wave Update ~ 27 January 2012 [Update 4:47PM]

Update 4:47PM: Dollar is filling that gap. That is one of the last "unfulfilled" charts I was watching.

Update 4:44PM:  One of the reasons I'm bearish is because the credit markets are telling me to be bearish 
Portugal is an example of rising yield deflation.   The ECB is playing "whack-a-mole" with each nation deep in debt. Greece, Italy. Well, they cannot forget Portugal huh?  There are other lurkers out there too. Expect a surprise or two or three. The market is funny that way.

ORIGINAL POST
Primary count is still wave iv of (c) of [y] of Minor 2 up.  Wilshire shown for superior form but the SPX would be counted the same.  We'll give the bulls the benefit of the doubt since support again easily held

However, we may have a stealth impulse pattern down from the high to today's low.  That gives the bears an edge. 5 waves down implies at least another 5 waves down should follow to either form a wave iv low or even begin a larger pattern for Minor 3 down.

Its not a great impulse pattern, but you can see we can make it work.  I kinda like it though.  Today had a bit of a distribution feel about it. Every little dip was bought and every little rise was sold.  However up volume ratio and advancers were positive pretty much all day despite the negative price bias. So that agrees with an interpretation of wave iv and suggests there is still a certain "buoyancy" in the market.
SPX shows the key price support zone and the channel. As long as they hold up in general, we have to assume this is wave iv because that what "looks best".
We'll see what Monday's price action does. It is a key day.

E-minis


Thursday, January 26, 2012

Elliott Wave Update ~ 26 January 2012

Primary count is the market is tracing out a corrective wave iv of (c) of [y] of Minor 2.   Today's high of SPX 1333.47 would mark the price top of wave iii.

There are 4 things to watch and all can be seen in the SPX chart below:

1.  The support zone (marked as Key Price Zone) should hold for wave iv. It has so far.

2. The lower channel line should, in general, hold for wave iv.

3. Wave iv should take the form of a corrective pattern [a]-[b][c] either a flat, zigzag or triangle or a combination.

4.  An impulse 5 wave pattern to the downside would indicate a trend change to bearish. So far at least the wave pattern from today's early high does not count well as an impulse down. Therefore we assume the market is tracing Subminuette wave iv with wave v to come after the corrective is over.

Fib calculations for wave v:

This is getting ahead of things but since wave i is the proposed longest wave of the structure, wave v will be shorter than wave iii. A good target for v would be .618 times the price length of wave i in this case.

Suppose wave iv's price low is 1310 SPX. You would then take 82.25 (price length of i) multiplied by .618 and you get a projected wave v price length of 51 points.  1310 + 51 points = a top of 1361 which would just break Prechter's announced stop of 1360.

The "minimum" requirement for wave v is just to make a higher high above today's 1333 mark.  So our target range for wave v would be 1334 to roughly 1361. This is very much subject to change depending on our ability to identify a completed wave iv, but I wanted to show how the thought process works in EW theory.



E-minis


Wednesday, January 25, 2012

Elliott Wave Update ~ 25 January 2012 [Update 10:40PM]

Update 10:40PM: Long term daily Wilshire 5000 chart. Watching the trendlines both down and up..  Overbought. Total volume low.

Update 7:17PM: Updated Apple chart.  This is a very satisfying EW pattern. Mature in its waves, channeling and technicals.  Sentiment is so freaking high on Apple I cannot imagine it getting higher. Thats how a top is supposed to be where one cannot imagine any downside.

Perhaps it has some Minute squiggles left in it, I don't know. but I do know they are definitely the rage of the media at the moment surpassing everything before.

Update 6:20PM: The last "unfinished" business is the dollar filling its gap up. Its getting closer.

Update 4:40PM: One of my very favorite yield counts. Quietly building pressure to break back upwards.  The FED does not control rates as much as they think they do. "Rates to be low til 2014".  And you know the amazing thing? Not one soul has even questioned this. Not even EWI as they are "enamored" with US treasuries too much in my opinion.

I say its bunk and a "top-tick" moment so-to-speak.  I dare say rates may go up quicker than anyone can  imagine. I can imagine it.

You know what? Both Stocks and Bonds are overvalued by far in my opinion.

ORIGINAL POST
The best count has the SPX and Wilshire5000 near the top of wave iii of (c) of [y] of Minor 2 up.  Minor 2 up cannot make a new high above the 2011 high. I use the Wilshire 5000 for arbitration purposes. The SPX should also not make a new high.

Prices maintained above the 1296-1307 support range and it was suggested that if this zone can be used as support, prices are free to make a move higher. So far that is exactly what has happened.

Wilshire has the best form. Comprising some 5000 stocks and practically the entire market, it is probably the best index to use for counting waves.
SPX is almost always identical count to the Wilshire.  I'll keep putting up an "ALT 2" as there are enough waves and price and sentiment and technicals to say Minor 2 may be over.  But its not the best count at the moment. Wave iii "looks" better for now.
Again using the Wilshire keeping an eye on the upper down-sloping trendline from 2011:
VIX closed that big gap finally:

E-minis



Tuesday, January 24, 2012

Elliott Wave Update ~ 24 January 2012 [Update 8:15PM]

Update 8:15 PM: Double long term divergence of Price-Volume-Trend of the DJIA.

Update 6:22PM: For those who think the DJIA can "never" fall below "such and such", I present two charts that should make you realize that indeed declines can and do happen.

China:
Japan's long term count and it doesn't appear to be over just yet.
And a closer inspection of the last few years:

Its got that (W) - (X) - (Y) look about it with the ol' tricky triangle (descending in this case) in the final wave (Y) position.

Update 5:05PM: Apple is due at least another wave up. Pretty gosh darn exuberant in A/H's.

Last week, the NY Times came out with a damaging article against Apple. Apple is clearly at the "top of its game". The huge gaudy profits reaped on the backs of near slave labor has finally gotten some major media attention.  And now this quarters numbers are downright obscene.

When your at the top, you have nowhere to go but down.  And Apple has no control over their products anymore.

Here is one such scenario for those who forget that we live in a real world:
If China were to say, invade Taiwan, and things got dicey with the U.S., and embargoes started to occur, what do you think would happen to Apple's stock price?

Or how about this:
Steve Jobs was the true engine of Apple. Apple's product line stales.  The moat is not that wide in the "gadgets" category.  Social mood declines and Apple's pricey gadgets suffer sales.

Either way, this chart is a very mature chart. Stocks don't go up forever folks.  And on the technical side, OBV is a warning.  After all, who doesn't own Apple already?

Exuberance is how a top should be and clearly everyone is exuberant on Apple tonight.

ORIGINAL POST
Today's gap down was the second serious test of the resistance - now-turning into support - zone of approx 1295-1307.   Prices responded with a steady rally.

Therefore the alternate chart posted in yesterday's update appears to be moving front and center.  Bears need a 5 wave pattern down for a confirmation of a trend change.  From yesterday's high to today's low counts best as a corrective zigzag, not an impulse.
Wilshire hourly:

E-minis


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.
ORIGINAL POST
There are a few areas I would like to hone in:

1295-1307 RESISTANCE ZONE
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.

CHANNELING
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.

SQUIGGLE COUNTS
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.

Sunday, January 22, 2012

Friday, January 20, 2012

Elliott Wave Update ~ 20 January 2012 [Update 5:14PM]

Update 5:14PM: Update on the apex situation. It is met today. These things are usually accurate within 1 day if they work. So we'll know by Tuesday if its valid.

Also note the SPY chart down in the original post shows the 50 DMA crossing the 200 DMA in a "bullish" manner.  No doubt this is viewed as a universally bullish event. A pop up Monday would "cross" the lines yet with the 200 DMA in a "flat" mode at best, you never know how the algos will react.

ORIGINAL POST
Price action is cementing bullish sentiment to extreme levels on various indicators as was expected.

Last few weeks it was suggested that the resistance zone from 1295 to roughly 1307 would be the "breaking" area for Minor 2. After slicing through resistance in a low volume melt up this week, prices have indeed managed to stay above this zone and use it as support for a day or so.  Price finished near the high this week for maximum punishment to bears.   Now the bulls are looking to keep plowing prices higher.  A continuing melt up will only end bad in my opinion.

Market internals are indeed waning and getting weaker with each stab upward.   We have seen this before and what takes the market 6-7 weeks in gains is wiped out in less than 1 week or even a few days. Recall the flash crash in May of 2010 was under similar melt up situation in which sentiment was extreme, volume was low, and everyone was just "watching" after a certain point.

Only this time around the "authorities", in their infinite wisdom, have implemented circuit breakers which will only aggravate the situation should it happen again. Imagine a 1200 point DOW plunge and they stop trading.  Part of the reason the market recovered that day was the roller-coaster effect.  Imagine a roller coaster that is purposely stopped at the bottom of a drop-off. When its turned back on what energy will it have to make it up the next incline? Stopping the market may induce an even greater liquidity lockup.

But I am getting ahead of things and thinking out loud here.

Lets go to the best squiggle count:
SPY gap is closed:
VIX closed beneath its BB and challenging the open gap. Thats good to have those pesky gaps closed.
A follow-up on yesterday's MUB chart. Bearish engulfing on high volume.  Its a bearish setup. A severe municipal bond sell-off will probably not be a viewed as a "bullish" long term event. 
Now the DJIA has closed above its BB. How many are convinced the DJIA is making a higher (intraday) high than 2011 soon? I would bet that sentiment is now widespread and very high in that it will. My take is that it won't and will still be a wave 2. 

E-minis


Thursday, January 19, 2012

Elliott Wave Update ~ 19 January 2012 [Update 5:14PM]

Update 5:24PM: The market has a way of always catching the majority off-guard. As all eyes have been fixed on Europe for well many months now, I have a feeling the good ol' USA is about to take its turn again in the spotlight.  The automatic debt ceiling raise will soon occur. How appropriate would it be to see bonds sell very hard off and everyone do a ? In fact thats my call here. I think TLT is in a major topping process and is on the cusp of breaking down violently.

Update 5:12PM: MUB painted an interesting candle today again on volume.
ORIGINAL POST
The upper bollinger band on the Wilshire 5000 today was breached. If thats what the market wanted to do, it did it.
SPY had its breakaway gap down challenged and pretty much closed. If thats what the market wanted to do, it did it.
There is an interesting APEX point that will be reached tomorrow.  Perhaps it was met today. Oftentimes these APEX points mark major turns.  In this case Minor 2 would be topping.
Waves i, iii and v connect cleanly on a channel as does ii and iv. Despite the market meltup, there is no need yet to even alter this count at even the subminuette level (black). Again, 1277 is a "control" for now. Note also again waning up volume, etc.
The daily VIX bollinger bands are getting tight.  Yet there is an open gap just below. If the market means to close it, then it hasn't done so yet. And yeah the whole VIX looks like a giant falling bullish - bullish for volatility - wedge.

SENTIMENT DATA:
Sentiment data is hitting extremes on all time scales.  I'll show some update charts tonight as data rolls in.

There is no use in pondering other wave counts. Minor 2 has the freedom to retrace as high as it needs as long as its not 100%.  SPX is about 80% so its a moot point now.

But I said this was going to be a powerful wave 2 as a Zweig Breadth Thrust event was triggered in October.

Then it was suggested a double zigzag would occur due to time factors. But double zigzags usually only occur due to price factors. It seems both were in play. Simply put, 1292 SPX was not a high enough price on the first zigzag.  Now the second zigzag has carried prices higher. How high? One wonders if the market will just squeak out a break of Prechter's 1360 "Stop".  It has been cruel that way.  But even if 1360.04 is the Minor 2 high, it would still qualify as Minor 2.

And thats about my take on things.