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Monday, April 30, 2012

Elliott Wave Update ~ 30 April 2012

An Elliott Wave pattern is clear on the NYSE Advance/Decline cumulative line and this is true on many timescales.

Weekly one can imagine that the NYAD count is in a cycle wave V (not the same as the cash index nor tracking pure social mood as I explain below) since the late 1980's or perhaps the 1987 crash.  Note the peak RSI occurred in the middle of Cycle wave III.

This chart represent's the "mania days" more than anything else out there. In other words, despite being on the verge of a complete worldwide financial armegeddon, this chart shows just how disconnected from reality everything is.  $16 Trillion in debt? No problem! $30-$40T in unfunded promises? No problem. In fact its someone else's problem seems to be the prevailing attitude. As long as "I get mine" attitude.

So despite the underlying rot in the system, the casino is still humming along at breakneck speed toward a cycle wave V mania peak.  We still think we can gamble, win, get out and not have the system affect us.

So I like to think of this chart a cycle wave chart of social "madness", an offshoot twist of social mood. And as you can see we may be peaking soon in the madness department.

Daily since 2009, we again can see a pretty decent Elliott Wave pattern with a proposed extended wave [1].
And since last October, again, zooming in, the waves are unfolding heading toward an all-time peak. Of course we thought that 2 years ago, but hey, a Supercycle wave in madness takes time to peak I guess.  The more waves that are laid down the more the count is strengthened, not lessened.

Again, RSI peak at the [iii] of 3 of (3) spot just where we would expect it.
So based on these charts above, one can surmise that it (NYAD count) is not yet quite finished.  But market prices may begin to churn.  We shall see.

 The GDOW and CAC charts are probably the best wave counts out there and have been consistently since the 2011 peak in each. Both may be in a wave [ii] (a)-(b)-(c) bounce which means the US markets will likely hold up in prices accordingly.

But take note, that the next wave down after [ii] for both the CAC and GDOW would be wave [iii] and that should be quite harsh and we would expect a harsh reaction in the US markets.
Backtesting the breakout for support. In SPX terms, the S&P is backtesting the 1388-1391 breakout.

E-minis


Friday, April 27, 2012

Elliott Wave Update ~ 27 April 2012

The Wilshire 600 minute chart says a lot. Either the market is in wave [v] of a deep wave (ii) rebound. In either case, they are ending waves.
Adjusted the bullish count to allow this as wave (iii) of [v] up.
SPY back in the upper gap.



E-minis


Thursday, April 26, 2012

Elliott Wave Update ~ 26 April 2012

The S&P pushed through breakdown resistance (1388-1391SPX) today. If it can backtest and hold this as support, then challenging the 1422 previous high seems very attainable and perhaps higher.

Futures have pulled back testing this breakout. If the breakout fails to hold support, a sharp selloff is a high probability. 
If support can be held on the Wilshire5000 - roughly 14,560 - then it will be able to challenge and make new recovery highs. If support fails, then there could be a violent selloff reaction resulting in a wave (iii) down.

So the major resistance has been pushed through and challenged. If  it holds, then this is not a wave (ii), but likely wave [v] of C.
The bear count is again simple.  If support fails to hold, downside surprise is possible.  It would be labeled wave (iii) down.

Its actually a good price point for a short entry attempt. If support fails then good gains can be made. If support holds then the stop would be today's price peak.
The CAC is a good proxy perhaps for what may happen overall with European and American markets. The CAC is likely in a wave [ii] bounce which means the American markets likely will bounce further also.  Which means a non-confirmation if the SPX manages new highs above 1422 and the European market do not.
The GDOW is also telling a wave story. 5 waves down from the recent counter-trend high like the CAC.
Weekly Wilshire shows the big picture. major divergence on the RSI and total volume drop-off is just sickly and MACD history bars are on the verge of negative.

If the Wilshire can continue to push up we have resistance spanning from the recent 14,951 - 14990 (2000 peak).




E-minis

Pushing on resistance.

Wednesday, April 25, 2012

Elliott Wave Update ~ 25 April 2012

Nothing much has changed as far as the near-term competing bull/bear counts.

Bull Count.  SPX must get above the previous breakdown resistance of 1388-1391, hold as support, then move higher. Jury is out.
Bear Count. Just a big fancy wave (ii) flat. A big, circuitous consolidation for a huge move to the downside. Well, thats a possibility anyways.  If the market cannot regain resistance, then I don't see why not. They will run out of dip buyers.  But, the market has to break support to be a wave (iii) down.

At least in the bears' favor is that the only time bigger volume seems to come into the market is when there are decisive downside moves.

I favor the wave (ii) flat pattern.  The gap up today was huge on the SPY and I tend to think if the market requires it to be closed it will just keep on selling.

And the SPX again could not quite close over the 1388-1391 level. It closed at 1390.72. Yes again, we quibble.


Tuesday, April 24, 2012

Elliott Wave Update ~ 24 April 2012

Possible Minute [iv].  But its at the point where it needs to make good on prices to the upside rather than the whipsaw action as of late. Support won't last forever.

Wilshire 60 minute chart channel revised to give the bulls the benefit of the doubt:

SPX daily. If 1356 support breaks, the next support is likely 1292-1300 area.  This move is likely to be swift and sudden (downside surprise) if it occurs and would fulfill a wave (iii) count to the downside.  Internally, there is still a very good chance this downside head and shoulder target will materialize.

The 1388-1391 breakdown zone needs to be re-captured by the bulls to avoid a head and shoulders follow-through to the downside.

E-minis


Monday, April 23, 2012

Elliott Wave Update ~ 23 April 2012

Pivot support has held - at least for today. Since the bear count is shown here, I figure it would be more useful to imagine a bull count instead.

Bull count would be a complex corrective. It could be over or it has more corrective work to do.

A break under the previous pivot (w) would be bearish price action.
Wilshire 60 minute chart. Not yet decisively breaking the uptrend channel. If it does, I believe the previous uptrend can be confirmed to be officially dead. But it hasn't broken it just yet.



Sunday, April 22, 2012

Friday, April 20, 2012

Elliott Wave Update ~ 20 April 2012 [Update 6PM]

Update 6PM: French CAC.  Could be nearing an initial 5 waves down and due a wave [ii] bounce.  If the wave [ii] bounce materializes, no doubt that the American markets would probably rally also.  This is on reason to respect the Minute [iv] potential discussed in tonight's post.

ORIGINAL POST
Obviously I think this is still a highly dangerous market for huge downside potential (even if it manages 1 more rally leg to challenge 1410+ SPX prices)

But we are still waiting to see what the market is going to do.  Since this is a wave blog, lets review the near term wave evidence.

1. We have a 3 wave move into the market peak - supports the notion this is merely Minute [iv] pullback.

2. We have what could be a 5 wave move from the market peak to 1357 SPX.  This formation has what could be an extended fifth wave.  The fact that the fifth wave is extended supports the notion more of a Minute [iv] pullback rather than a first wave down.

3. Others have it labeled as a double zigzag down. This would support the notion of a Minute [iv] pullback.

4. There are three waves up since the 1357 low. This is evidence of a counter-trend move to the 5 waves down. That supports the notion of a wave (ii) bounce although it could merely be an (x) wave within a complex Minute [iv] corrective.

5.  There are 3 waves down since the 1392.76 high of the 17th of April.  This supports a continuing corrective pattern.

CONCLUSION
Most of the near term wave evidence, one must conclude that there is a decent chance the market is tracing out a complex Minute [iv] pattern. Likely it would be a (w)-(x)-(y) pattern.

There is breakdown resistance at 1388-1391 SPX. The market needs to conquer this to have a chance at higher prices. So far it has been stubbornly hanging around and has refused to continue impulsing down.  That is the price action we are faced with.

At any rate there is consolidation going on. Since the move down from 1422 was sharp,  the consolidation could easily be a bearish consolidation. Hence this is why the market in my opinion is more dangerous and risky to be long.

So we are again presented with two "best" counts:

The bull count: Or see this chart for a variation on the pattern
The bear count. Even the bear count supports the notion wave (ii) is not yet over challenging breakdown resistance because there has not been a 5 wave move down from the 1392 peak just yet.








E-minis [Update 12:41PM]

Update 12:41PM
Price action supports the notion of a complex wave [iv] correction rather than a wave (ii) bounce.  A favorite of the market would be the (w)-(x)-(y)-with-a-triangle-in-the-final-position

Version 1:
Version 2:


Thursday, April 19, 2012

Elliott Wave Update ~ 19 April 2012

The wave pattern since the 1357 SPX low has not been impulsive up - nor impulsive down for that matter (yet).

Price action and technicals are also skewed on the bearish side. The Industrials closed solidly under 13K again. And the S&P500 was unable to close solidly above the previous breakdown zone of 1388-1391 SPX. The market is struggling to maintain prices.

Its almost as if everyone is backing off to the sidelines with - at best - a neutral stance. This can be outright dangerous for this market at these elevated prices.  For if buyers are exhausted at these prices, and short sellers are also exhausted (been burned too many times), what you can have is a bidless market.  And this can lead to a flash crash. Couple that with new market circuit breaker rules, and you cannot be sure the outcome if one is ever triggered.

(All rules in life were meant to be tested and broken at least once. The CB rules implemented a few years ago have not been tested.)

The market is ripe for just such a crash. Not overly bullish, not overly bearish, this is not a price zone in which you "bet the house" on an up direction (nor necessarily on a down direction).  This reminds me of May 2010 period when the market came off an exuberant high and then turned down a bit. And then tried to rebound but there was a sudden loss of interest in bids.  This is a very similar situation.

This is not to say that the market will flash crash at this exact time, only that conditions are ripe and similar from the last time it happened.

The wave count supports the potential for just such a huge wave down.
As EWI always likes to point out, wave theory is a game of probabilities based on the best wave count patterns (in conjunction with sentiment and technicals) at any given moment in time. At this time the wave pattern, technicals, and sentiment support a more bearish picture rather than not.

We have a potential 5 waves down from a peak (thereby forming a wave one). We have what is now a 3 wave counter-move from a recent low (thereby forming a wave two). At the least, the wave structure short term suggests another 5 waves down at  the least. And if its a wave (iii) its likely to be harsh and unforgiving.

If the market decides otherwise, then so be it.  If it chooses to rally, then so be it. The market is always right in my thinking. It will let us know if it wants to get above the breakdown zone of 1388-1391. And if it does, I still don't think its worth chasing.


E-minis


Wednesday, April 18, 2012

Elliott Wave Update ~ 18 April 2012

Last week when the market rebounded sharply to 1388, the next day saw somewhat of a reversal and a wipe-out of that day's price gains.  The market was unable to consolidate that big up day.

The market managed yet another big day yesterday and today did a better of job of consolidating the gains. Yet still the DJIA closed down 83 points and market internals were weak all day. Again the SPX closed below the previous breakdown range of 1388-1391 SPX.  So we have a mixed bag going forward.

Based on the short term wave structure, it favors another stab at re-taking this resistance range labeled either as a double zigzag corrective or an upward flat. They essentially would be the same.

E-minis


Tuesday, April 17, 2012

Elliott Wave Update ~ 17 April 2012 [Update 8:10PM]

Update 8:10PM: NASDAQ100 - could be an expanding leading diagonal triangle
Of course the market is no longer deeply oversold. I once did a study on the starting NYMO price for wave threes down during the 2007-2009 market decline and found that wave threes - of any decent size - never usually started from a negative number. In fact it was usually just above the zero line.

So the NYMO is nearly perfectly "setup" for a wave (iii) down  if thats what the market has in store.
Dollar still in a long-winded stealth uptrend. Its getting to the point where to keep making progress, it will have to thrust higher in a wave three move.

Technically and sentiment-wise, its ripe for a big up move.
Updated Presidential Approval chart. Like the stock market, Obama's approval has not broken the uptrend channel. But it is diverging with last summer's peak.  This is a good example of how social mood determines not only stocks but how we feel about our politicians.
The President is more likely sensitive to the Intermediate trend in mood. But Congress' Approval is probably susceptible to the larger degree social mood trend. And as of the 21st of March, Congress' disapproval is still growing. This indicates the larger trend (of Supercycle degree)  in social mood is heading more negative. 

The stock market rallied since October and Congress got little benefit - although Obama did. 

ORIGINAL POST
Possible upward flat corrective. It was not a 90% up day. Strong yes, but the SPX closed under 1391. And total volume is uninspiring.

The aforementioned breakdown point was 1388-1391. It would have been better had it been able to close above 1391. Yes we quibble.

Wilshire shown for form.
SPX Daily.  Bull or bear? We'll let the market decide and place your bets. If the SPX can get and hold above its breakdown point of 1388-1391, then there is an excellent chance it can power on to new recovery highs.

If it cannot retake resistance, look out below, a wave (iii) surprise downside is coming fast.
I favor downside coming - as of this moment - because of the 3 wave nature of the pattern since the recent 1357 low.

E-minis