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Friday, June 29, 2012

Elliott Wave Update ~ 29 June 2012

Not quite a 90% up day, but strong nonetheless. Today is one of those "key marker" days.  A close under today's daily candle is probably bearish.   On the SPX that translates to a close under 1313 SPX.


E-minis


Wednesday, June 27, 2012

Elliott Wave Update ~ 27 June 2012

Primary count has not changed.
6 month rate. Working on a wave 5 of (1) up in yields.  This implies that the all-time low has been set.  If 3 month yields hit .5 to .6, the Fed will likely raise interest rates.  The FED don't control rates, the market does.  Greenspan has reiterated this many times. The FED is certainly a major player and a has an influence on prices, but ultimately they cannot control the interest rate market. Social mood ultimately wins out.
Current CPCE.  Certainly not at any kind of bearish extreme.


E-minis


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.





E-minis


Monday, June 25, 2012

Elliott Wave Update ~ 25 June 2012

Today made a lower low which makes 5 waves down since the recent 1364 peak. The primary count is Minor 3 down.

Sunday, June 24, 2012

Friday, June 22, 2012

Elliott Wave Update ~ 22 June 2012

It would be ideal for the wave structure if Monday made a quick lower low beneath Thursday's low prior to any retrace into 1346 - the bottom of wave i. This would complete a small 5 wave pattern down from the recent rally high peak of 1363.46.


E-minis


Thursday, June 21, 2012

Elliott Wave Update ~ 21 June 2012

Today's downdraft confirmed the move from the recent 1266.74 low was a 3 wave move. This implies Minor 2 is over and Minor 3 down of (1) of P[3] has begun.

E-minis


Wednesday, June 20, 2012

Elliott Wave Update ~ 20 June 2012

The new house is taking up much more time than I wanted. And I have the old rental to deal with too for the next few weeks. Sorry if these posts are short and it seems like I am mailing it in.

However, the primary count of Minor 2 seems to be taking care of itself so no need for me to delve into every possibility.  Its either Minor 2 or its not. Nothing we can do about the count here.  Things are coming unglued in Europe and the U.S is facing a fiscal cliff in less than 6 months. You think withdrawing $1T from the economy is no big deal? Think again. And most people assume Congress will work things out and save the day in the end. I am not so sure about that. I am inclined to say that social mood is slowly infecting the government.

My target of 1365ish has been met but it may be working on a small wave (iv) triangle.


E-minis


Tuesday, June 19, 2012

Elliott Wave Update ~ 19 June 2012

Our 61.8% Fib target of 1364 has been met for Minor 2. Primary count could be missing a wave (iv) and (v) of [c] of Minor 2.

I speculated a while back that since Minor 1 wave down was a bit of a bullish falling wedge, that Minor 2 would be swift and sharp. That has indeed been the case.
Today was about an 85% up day. Pretty strong yet the VIX ended up on the day.

Wilshire has a distinct [a]-[b]-[c] look about it on Minor 2.  Very equal so far between [a] and [c] waves.



E-minis


Monday, June 18, 2012

Elliott Wave Update ~ 19 June 2012

The new house is keeping me busier than I thought. Needs some work and never enough time it seems. A month or so, things should settle down for me.

As far as the wave count, again nothing has changed for the outlook. The SPX has already retraced over 50% which is solidly in wave 2 territory.

Via Sentiment Trader, there is now more bullish sentiment than bearish for the first time since approximately May 1st.  That means Minor 2 is working on shaking out the excess bearishness that existed.

So everything is "on schedule" for Minor 2 and it can indeed go higher if need be. And if the market keeps creeping higher, then Minor 2 should stop it in the major resistance zone of approximately 1354-1365.

E-minis


Saturday, June 16, 2012

Elliott Wave Update ~ 15 June 2012

Sorry for the late post. Closed on my house today! Had my cable switched, so back online.

Outlook for Minor 2 is on schedule. 

Friday, June 15, 2012

Thursday, June 14, 2012

Wednesday, June 13, 2012

Elliott Wave Update ~ 13 June 2012

Outlook hasn't changed. Minor 2 is probably the best count. But be on your toes, Minor 3 down is right around the corner.

Sentiment is somewhat neutral on a long and short scale.  So there is no edge either way.

E-minis


Tuesday, June 12, 2012

Elliott Wave Update ~ 12 June 2012

SPECIAL ELLIOTT WAVE INTERNATIONAL (EWI) PROMOTION - FREE ISSUE OF FINANCIAL FORECAST (Offer has been extended until June 14th).

<------------Just click on the link to the left (EWI), become a FREE CLUB EWI member (it really is free, no hassles), and get access to a lot of free EWI material.  This month they are offering a full issue of Financial Forecast (a monthly newsletter). I highly recommend it for those that are not club EWI members.

DISCLOSURE: I get $3 for signing people up to be a CLUB EWI member if you do it through my links. I then get a small commission if you decide at any time to subscribe to one of their newsletters or other services.  I currently subscribe to 4 services; the monthly Financial Forecast, Elliott Wave Theorist, and The Socionomist; and the Short Term Update (Posted every Mon - Wed - Fri).

ORIGINAL POST
Sorry for the late posts been busy getting the new house ready. I bought a small Cape Cod style house and it needs some paint, etc. I have access to it early so am getting some things done while its empty. Closing is on Friday and we move in!

Despite the e-mini futures selling off 45 points from a post -Spanish bailout high, it appears Minor 2 is not yet finished and that the pullback was merely a [b] wave of Minor 2. That is the primary count.

The daily. 50 DMA could use some loving. The main theory is that Minor 2 should die on the shores of the next major resistance band of which we'll call the middle of the band = 1360.



E-minis


Monday, June 11, 2012

Elliott Wave Update ~ 11 June 2012

Lets see if this count holds up:
The top alternate count is that a [b] wave expanded flat is tracing out.

Sunday, June 10, 2012

E-minis



These kinds of gaps up are always interesting and telling somewhat.  For instance, if the gap was retraced 100%, then you can almost say that the market gave it its best shot but was unable to hang onto the gains at all. And if that happens, it can certainly be viewed as bearish price action.

So we'll see what happens. A 100% retrace of the gap up tends to be bearish here in my opinion.  So I would expect that if the market requires much higher prices in wave [c] of Minor 2 up, then the gap will probably remain at least partially open until Minor 2 is complete. 

This is similar to the still partially open gap that resides from 1253 - 1259.75. I had figured that that gap would be closed on the recent downturn but its too important for the bullish case so it had to remain open. A close under 1253 on the e-minis would be a bearish event.  

But first the market needs to close under tonight's gap up before we can address the open gap from 1253-1259.75. It should be very interesting week to see how price action plays out.

Friday, June 8, 2012

Elliott Wave Update ~ 8 June 2012

SPECIAL ELLIOTT WAVE INTERNATIONAL (EWI) PROMOTION - FREE ISSUE OF FINANCIAL FORECAST (Offer has been extended until June 14th).

<------------Just click on the link to the left (EWI), become a FREE CLUB EWI member (it really is free, no hassles), and get access to a lot of free EWI material.  This month they are offering a full issue of Financial Forecast (a monthly newsletter). I highly recommend it for those that are not club EWI members.

DISCLOSURE: I get $3 for signing people up to be a CLUB EWI member if you do it through my links. I then get a small commission if you decide at any time to subscribe to one of their newsletters or other services.  I currently subscribe to 4 services; the monthly Financial Forecast, Elliott Wave Theorist, and The Socionomist; and the Short Term Update (Posted every Mon - Wed - Fri).

ORIGINAL POST
Today's wave action is just what we'd expect for a [b] wave.  We have to keep on our toes as the [b] wave may be too short in time and will not finish until next week.  [b] wave can take the form of a flat, zigzag or triangle.  So far we have a 3 wave zigzag from [a] to [b]. But that zigzag may only be wave (a) of [b].

E-minis


Thursday, June 7, 2012

Elliott Wave Update ~ 7 June 2012

Primary count is that the top of wave [a] of Minor 2 occurred at today's price high.  The price peak represented already a 40% retrace of the entire decline from 1422 to 1266 SPX. So the evidence is strong that Minor 2 is occurring.

Minor 2 should normally be a sharp 5-3-5 zigzag up.  It certainly has been sharp in the [a] wave.  Now we are looking for a [b] wave pullback and then [c] wave to finish Minor 2 up.




E-minis


Wednesday, June 6, 2012

Elliott Wave Update ~ 6 June 2012 [Update 9:20PM]

[Update 9:20PM:
MORE ON SENTIMENT DATA AND HOW IT TIES INTO WAVE STRUCTURE(S)
Sentiment data is a tricky thing. But a thorough understanding is essential in Elliott Wave theory.  After all, social mood is nothing more than waves of sentiment changes (and its accompanying extremes) of many degrees forming the wave structures that we like to label.

Simply put, at bullish extremes, we have high prices. At bearish extremes, we have low prices.

However the tricky part is fitting this data into wave structure.  For instance the primary (projected) wave count is that Primary wave [3] down is in place which will consist of (5) Intermediate waves down with each Intermediate wave down - (1) - (3) and (5) - in turn consisting of 5 Minor waves down.

So as you can see, the current wave count is only Minor wave 1 down of Intermediate (1) of Primary [3].  The "larger picture" projects by the time P[3] down bottoms, sentiment data will be very bearish on a long term scale.

So what is a long term scale for bearish sentiment? Well for instance it depends on the time frame. Since P[3] could take years to fall, you should be looking at a 30 day moving average of some kind of sentiment data.

But the terms "long term", "intermediate term", "medium term", "short term", "near term", "extreme", etc, can be confusing.  And tying that into varying wave degree labels can be even more complicated.  In turn calculating what typical sentiment data should look like at each wave degree price extreme is an even more daunting task.

But take heart!. There are examples in history for comparing sentiment data at varying wave degree highs and lows of all sizes.  This type of work is what EWI is best at.  Though you may not like some of their "squiggle" counts (15 minute charts or less)  they study the "larger picture" and how it ties into the larger counts in a most effective way. This is probably what most fascinates me about EW theory. I can see and feel these large term changes over time. We all can if we look and think and feel.

AN EXAMPLE OF USING SENTIMENT DATA FOR A SUPERCYCLE PEAK
One way I like to look at the theory that 1999 - 2000 was the true Supercycle peak in social mood is looking at the U of Michigan Consumer Confidence survey long term stats:

Even at the stock market peaks of 2007, this sentiment data diverged from the true peak in the year 1999 - 2000. A lower high in survey data in 2007 was indicative of a cycle "b", not a true sentiment extreme. Another longer term example is how the DOW/GOLD ratio topped in 1999, not 2007.  One can conclude that sentiment topped in 1999-2000 and hence the true Supercycle orthodox top. This point does matter. After all, if sentiment topped in 2000, then sentiment has been falling for 12 years not merely 5 since 2007.

In other words, it may have taken 12 years for sentiment to be ready to accelerate toward truly bearish extremes and panic which top those experienced in 2008 and early 2009.

And yet despite the SPX having come all the way to 1422 SPX and the DJIA to almost within 1000 of its previous 2007 peak of above 14K, you can see the sentiment data is wildly diverging negatively. Yes there was a sharp rebound in Consumer Sentiment but that rebound was not even 50% back toward the 2000 peak. So something is not right - either the stock market is too high or sentiment on the U of Mich chart needs to rocket higher. My bet is the former - a great negative divergence is occurring and stocks will fall to catch up with long term negative sentiment.


EVERY MINOR AND INTERMEDIATE PEAK WILL REFLECT AN APPROPRIATE LEVEL OF MINOR AND INTERMEDIATE LEVEL OF SENTIMENT DATA
Minor waves will produce their own levels of sentiment data as will Intermediate levels and then larger Primary levels.  These differing wave degrees can produce similar sentiment data depending on what scale and time frame you are employing. For instance a daily type sentiment data chart may be adequate for a Minor wave degree and may look similar at an Intermediate wave degree. A weekly degree chart may be appropriate for an Intermediate wave degree count. A longer scale moving average would be more appropriate for a Primary degree chart.

THE MAIN POINT IS TO TRY NOT TO MISAPPROPRIATE THE WAVE DEGREE COUNT WITH THE SENTIMENT DATA.
And this is where the "tricky" part comes in and is where the beginner has the longest learning curve. What constitutes an appropriate level of sentiment data for an appropriate wave degree?  Experience, study and intuition. Thats where EWI excels and one of the main reasons I subscribe. They simply have resources, access, and time to study the data where I do not. I do not have proprietary indicators such as Sentiment Trader or have not been studying sentiment data as long as Robert Prechter for 40 years. And most likely you, the reader, do not either.

However we can count waves, we do have simple access to every day market technical and sentiment-type data and we do have our own intuition to rely on. And we can of course subscribe to the services mentioned above.

We also have the world around us to rely on. We have great free web sites such as Zero Hedge, Mish's Global Economic Trend Analysis, The Market Ticker, and Dr. Housing Bubble. These kinds of sites give you the real deal with no bullshit.  You can make up your mind on your own. You can come up with your own reasoning if you like. But if you're not credible in your reasoning, if you don't consistently tie in the "big picture" key aspect of sentiment data with your wave count, you may get the long term wrong.

CURRENT INVESTOR INTELLIGENCE SENTIMENT DATA 
The preceding conversation has somewhat led us to today's Investor's Intelligence Survey data which shows that current level of bears is still quite "low". Is it extreme bearishness? Certainly not.  In fact it is still a bullish stance on the market despite a 156 point price drop.  In other words, this chart is probably not an "Intermediate" level of wave degree low.   But can it be a Minor 1 wave low? Yes it certainly can be. Thats the tricky part.

If it is a Minor 1 wave degree low that is probably good for bears long term. Why? Well look at the chart. We have 5 waves down and yet the level of bears has not increased as it has in other significant corrections since the 2009 low. In other words, bullishness is being held onto despite the market dropping 156 SPX points!  This is the first time bears have not increased significantly for this level of price drop since 2009. Something has changed.

That change is that bears are worn out on this price decline for the first time since 2009..  Despite the price drop, they are not excited. Even I have felt this malaise (being a long term bear that I am). This means the market MAY be soon "ripe" for a really big Minor wave 3 down that takes prices likely back toward the October lows and even lower in a panic. And then you'll finally see bears increase in size.

One thing I have learned in EW theory is that constant ebb and flow of bulls and bears is predictable as the rising of the sun and moon. It will happen. It will ebb and flow you can be certain.  But they don't rhyme the same way every time of course.


CONCLUSION:
Sentiment data is tricky business. But its essential to understand EW theory.  Sentiment data must make sense with current wave counts or projected wave counts and to the appropriate wave degree.

The current level of Investor Intelligence survey data suggests that only a Minor 1 wave low is in place and that the REAL panic is likely ahead in a Minor wave 3 down once Minor wave 2 completes its retrace.

In my opinion a CLOSE under today's "key price marker day" will be a warning that a Minor 3 panic will occur. And if that panic does occur, you'll certainly see the II survey level of bears increase finally to an appropriate level for an Intermediate wave degree. And bottom line is prices will be much much lower than 1266 SPX.

ORIGINAL POST
The primary count is that the market is in Minor wave 2 up and will retrace a good portion in price of the total decline from 1422 SPX to 1266 as in any normal wave 2.

WAVE COUNT & STRUCTURE:
1.  The wave count passes the common sense test. When viewed from afar on a daily index you can see 5 waves.  5 waves can also be seen clearly on a weekly. 

2. The entire move from 1422 SPX to the recent 1266 low resembles a wedge shape. This may portend that Minor 2 will be very sharp and fast. Certainly today was a sharp up day and supports that notion.

3. The entire decline was 156 SPX points which is sufficient to form a Minor wave 1.  For instance Minor 1 in P[1] down in 2007 was 170 points in length.  

4. It could be that this is merely Minute [i] of Minor 1 down. Its too early to denote those kinds of things. Wave degrees can be changed. Its form that matter most and there is 5 waves down on the SPX, Wilshire5000, INDU, Transports and NASDAQ.

SENTIMENT
1.  This blog cannot continuously post sentiment data from proprietary sources night in and night out.  However from time to time I post "fair use" data from sources such Sentiment Trader and Elliott Wave International.  My point is that Minor 1 down of 156 SPX points should form a significant low in sentiment and the current data had backed this up.

2. Using the sentiment data to time the price low of a 170 point move is always the tricky part. Sentiment can always get more extreme or even diverge with the final wave low. But if sentiment is extreme in conjunction with a completed 5 waves, and a sharp rebound occurs such as today, we can judge that a wave 2 retrace is probably underway. Hence the primary count that Minor 2 up is likely underway.

3. EWI posted some extreme "Daily Sentiment Index" (DSI) numbers via Trade-futures.com  in their Monday update.  Some extreme examples they gave were the following:  Stock market: 5%  Oil: 5% CRB:8%  Euro 5% These are extreme numbers and a counter rally is always expected to shake these numbers out. Today's rally no doubt had that effect.

4. Sentiment Trader also posted some items that were extreme. Their proprietary Intermediate term (multi-week./month sentiment data) was very extreme bearishness.

5. The point is that these extreme numbers occurring at a wave 5 low is perfectly normal and a confirmation that a wave 5 low is in place. It is now wave 2's job to move these numbers back to a position that is not extreme bearishness. Its not that these numbers have to go to a bullish extreme. They don't. But they should at least go back toward a solid neutral. It takes price to get them to move the other way off their lows and today's price action likely did wonders to do just that.

TECHNICALS
1. Today was an 87% up issues ratio and 91% up volume ratio on the NYSE. The NASDAQ was 82% and 92% respectively. Pretty darn close to an overall across-the-board 90% up day for the market.  

2.  Today's candle is what I like to call a "key price marker" candle day to keep in mind for the future. In other words a close under today's candle and yesterday's closing price of  1285 is a "line in the sand" for bulls.  Why? Because an extreme amount of buying energy went into today's bullish buying binge. A close under today would nullify this binge and be very bearish. 

3. Think of it this way: If you are a boxer and come out swinging as hard as you can in the first 2 rounds and your opponent takes the blows with no visible effect, you are likely to lose the fight in the long run.  The stock market can work the same way. If stocks come out swinging as hard as they can (today) and yet if bears can manage to close under this price range sometime in the near(er) future, you have just signaled to the market that its best shot was taken and it failed.

4. The market has regained 1292-1296 resistance. It must of course hold this range on any pullback. 

5. The market's next resistance is likely 1356-1370ish roughly.  This is where a Minor wave 2 would be expected to fail.

E-minis

Any pop above 1298.9 SPX would violate the count shown here as wave (iv) of [v] cannot overlap wave (i). The next count is that Minor 2 is beginning and will retrace a good portion of the entire decline from 1422 SPX.  

At this rate the opening will push 1300 as it is unless futures reverse in the next 4+ hours which they might.

Good Luck.

Tuesday, June 5, 2012

Elliott Wave Update ~ 5 June 2012

The last 2 days have shaken out the short term oversold extremes on the NYSE and NASDAQ. The wave count seems to be missing a small wave (v) of [v] of Minor 1.
Even the e-mini all-hours looks corrective.

Extreme oversold seems to have worked itself off and prices have not rebounded too sharply (yet) in an overlapping, non-impulsive up wave bounce.  That fits the small wave (iv) of [v] bounce.  For instance, TRIN, price oscillators, cumulative tick,VIX and VXN strength  up issues and up volume ratios have all rebounded and are closer to being short term overbought rather than the extreme short term oversold that Friday's selling produced.

So we'll see if we get another lower low. The wave count would look best if we did.

If I were to take a guess at the target area of wave (v) of [v], the e-minis shows a likely spot - the unclosed gap up from 12/30/11 to 1/3/12 that is still open from 1253 to 1259.75. On the SPX the area is about 1256 SPX.
On the daily, the SPX closed under its 200 day SMA by a mere fraction of a point.

E-minis