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Friday, August 31, 2012

Elliott Wave Update ~ 31 August 2012


E-minis


Thursday, August 30, 2012

Elliott Wave Update ~ 30 August 2012

Squiggle count on the SPX:
Certainly the GDOW since the October 2011 low and the 2012 low are 3 wave correctives up. Just think about the implications of the wave pattern on this GDOW. If the GDOW is in a series of (1)-(2), 1-2 down since its 2011 high, THINK of how large wave 3 of (3) down will project lower prices.
SPX weekly. Simple double negative divergence on the RSI with lessening momentum and signs of rollover with contracting volume on a rising market within a wedge shape no less and obeying a 7.25 year cycle ellipse that is petering out: A recipe for a historic and swift decline.
Whats worse is the still rising 50 and 200 DMA's will prove to be unsustainable if a historic price decline occurs and likely be violated with extreme prejudice.

A price drop under the lower rising wedgeline thereby obliterating the 50/200 may induce a panic bigger than 2008.
A closer look:

E-minis


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.


E-minis


Tuesday, August 28, 2012

Elliott Wave Update ~ 28 August 2012

Wilshire5000 used for form:
SPX using a lower wave degree. Wave degree is not important at this juncture. Form is.

E-minis


Monday, August 27, 2012

Elliott Wave Update ~ 27 August 2012

Today finished tracing what appears to be a 3 wave up corrective that we label wave ii. Therefore the market is setup for a bear wave iii down.
Or we can label like this:
Wilshire 5000:
VIX looks primed to fill its overhead gap sooner or later:
SPX daily. Remember, if its a true ending diagonal wedge - and the internal wave structure supports that notion along with weakening technicals in each successive leg - then a huge price collapse is coming due to a 2 year exhaustion pattern.
Remember this chart? Its a visual presentation of Bob Prechter's theory of a 7.25 year cycle. October is about the midpoint.  Eerily it obeys that ellipse.

E-minis


Friday, August 24, 2012

Elliott Wave Update ~ 24 August 2012

Although it appears to be a simple corrective 5-3-5 zigzag from the top indicating a corrective wave (and it may be), by Elliott Wave rule, the wave down from 1426 actually counts better as an impulse than a zigzag.

E-minis


Thursday, August 23, 2012

Elliott Wave Update ~ 23 August 2012

The Wilshire5000 is quietly now some 325 points from its 2011 high.  We'll keep this wave count up as primary count for the overall market:
The S&P 500 of course made a new high. It was predicted on this blog a few weeks ago that if the S&P made a new high, the Wilshire would likely not.  So far that has been the case. The Wilshire failed to make a new high by almost 70 points which is a fairly decent divergence from the SPX.

Bears would like to label the SPX a wedge with underthrow.  A rising wedge is a bearish pattern in and of itself. However having underthrow - where prices to not even go up to meet the upper wedgeline - is an added layer of bearishness to price action.

What is a rule of contracting ending diagonal patterns? One is that the internal wave structure consist of "three's".  Certainly the wave 1, 3 and 5 wave legs since the 2010 low better counts internally as "three's" rather than 5 wave impulses so far.  That adds weight to the wedge scenario.

And what is a rule for prices once a wedge exhausts? A price decline back to under where the wedge started.  That would be under 1000 SPX in this case.  And that decline may be rapid as compared to the time it took to gain the points. From 1010 SPX to 1426 SPX took a full 25 months. If a "normal" price decline to 1000 SPX occurs, we would expect that to take 8-12 months. However if a rapid price declines occurs, we can cut that time by by half or more again. It could be a matter of a few months. This is why exhausting wedges are considered dangerous.

So whats my point? the point is we'll know soon enough if prices have exhausted.  The internal structures since the 1010 SPX low indicate a lack of impulsiveness despite the overall gains toward 1426.  This is a key element is wave theory.

The wedge also is weakening on each up leg as one would expect.  The last gasp of these past few weeks has been on low volume and lacking in 90% up days. The market is ripe for a major rapid decline of 400+ SPX points.

Of course the Wilshire500o is not counted as a wedge. Therefore it would be in wave 3 down. And wave 3's are always the strongest.
Potential squiggle count if the market has topped at 1426 SPX:

The NYAD counts as finished:
Of course longer term:
NYAD weekly. RSI is looking ripe for a major decline.
SPX weekly. One more day in this week, but even the double negative divergence on the RSI is pronounced.  In conjunction with a wedge pattern, the negative divergence is strengthened.

E-minis


Wednesday, August 22, 2012

Elliott Wave Update ~ 22 August 2012 [Update 5:36PM]

Update 5:36PM: The dollar has fallen back toward the pink circle that was suggested a few weeks ago. Sentiment has corrected from a high of above 80% back to just a hair under 50%. Perfect setup for a big push upwards. 

ORIGINAL POST
We've hashed out the sentiment, technicals and wave pattern. Now lets see what happens over the next 2 more days. We have a setup for a third wave down. Even if this is just a correction, we can expect at least an a-b-c "three"
Overall count using the Wilshire5000:
I am well aware of the fact that this giant wedge count could wind up looking ridiculous if this is not a true wedge. I admit its not a perfect count by all means. However technically, the wedge count does fit. We have lessening momentum with each leg up in wave (C). We have lessening volume. 

All I can say is that it feels right and makes sense.  Now all we can do is to see if prices are indeed exhausted.  If they are, then a big price collapse is coming.  Thats the fact of ending diagonal wedges. We don't make the rules on these things, the market does.
GDOW looks ripe for a decline:



E-minis


Tuesday, August 21, 2012

Elliott Wave Update ~ 21 August 2012

A pretty decent reversal today.  This comes after what appears to be all waves in place on the Wilshire5000 and S&P500.  The S&P broke to new 4 year highs fulfilling a rising wedge since the 1010 SPX price pivot low of July 2010, the DJIA and Wilshire5000 did not confirm.  In fact the Wilshire closed well beneath yesterday's closing price.

Note small five subwaves since pink wave (iv):
The VIX took a decent jump today. I suspect that gap will be closed sooner or later. But where will prices be?
The S&P fulfilled the wedge pattern by achieving a new high. If today was its peak, then we must respect the bearish potential of a price collapse following the wedge.
Or the S&P counted as a rare triple zigzag: They both imply the same thing - that the rally is over.
10 year:
Potential Apple count. This count is from the perspective that its wave (1) was the extended wave. And on log scale you can see the comparison via the black lines where wave (3) and (5) would be about equal. Note the OBV negative divergence.
Overthrowing its expanding Ending Diagonal pattern?
Still a wide non-confirmation between the NY Composite and the Industrials. Does it matter? I think so.
NASDAQ100 count
Yesterday's CPC close. Pretty frothy.
CONCLUSION:
Price action was potentially bearish today with the morning poke up high and then closing lower than yesterday's close.  What the bears need is follow-through to the downside to confirm this potentially bearish candle. 

The minimally fulfilled wedge in the S&P and a potential wave 3 down in the Wilshire5000 could portend an intense wave of selling.  

Here is the kicker:  IF this is wave primary [3] down to come in the S&P and Minor wave 3 down in the Wilshire5000 and DJIA, prices could drop extremely fast after upper support breaks. 

WHERE IS THE MARKET BREAK POINT?
Well the lower rising wedge trendline on the S&P500.  This would roughly match a price area betyween the 50 DMA and the 200 DMA between 1365 and 1332 SPX.  If prices break beneath the lower rising trendline - and by extension the 50 and 200 DMA - things could get out of hand to the downside.