Custom Search

Wednesday, October 31, 2012

Elliott Wave Update ~ 31 October 2012

Still trading in a narrow range. Best count is that the market is in a wave (iv) of [i] down.


Tuesday, October 30, 2012

Sunday, October 28, 2012

Friday, October 26, 2012

Working of oversold with no real price increase. Lots of squiggle options though. However, again, price action is on the bearish side.

E-minis


Thursday, October 25, 2012

Elliott Wave Update ~ 25 October 2012

Again stocks are unable to sustain a rally.  Big burst out of the gate only to be sold into.

Squiggles are a best guess here based on a possible wave [4] sideways action of the past few days. But for all I know, maybe stocks are instead just consolidating before a nasty plunge.  Certainly we have seen futures since the close get active.
Wilshire hourly chart shows a different take on the recent sideways action.  Could be a wave (iv) of [i]. Which implies we have another lower low coming prior to any bounce. And yes the top alt - Minor 4 - is still not officially eliminated because prices are still elevated. However the wave pattern and - more importantly - price action favors the bears at the moment.
On the SPX perhaps a test of the 200 DMA.
Trading range was defined largely by QE3 day candle. The trading range has now dropped back into Super Mario (Draghi) candle.  A close under 1396 is what the bears are trying to achieve.
DJIA with the Supercycle channel line (blue) and the wedge in green. Log scale shown. Heck it looks deadly bearish to me, but then again I'm probably biased as all heck. So I post and you decide.

BOTTOM LINE:
Da Bears have quietly taken a firmer grip of the markets. Even after today's opening spike you just felt that it was bound to reverse which it promptly did.  Things are not particularly oversold so there is no requirement for a major bounce.

E-minis


Wednesday, October 24, 2012

Elliott Wave Update ~ 24 October 2012

E-minis, all-hours, may show 5 waves down from the recent peak.  Forms nicely in a channel. This would imply a bounce is due. Pretty nice triangle for wave iv and yes wave v did barely make a lower low.
Squiggle count is again tricky. The high TRIN readings recorded yesterday worked off the extreme oversold today despite the overall down day.  That may be a warning sign that things could get ugly for prices. If oversold gets worked off in a decline, the odds of more decline increase.

Again the point here is that if this is a third wave, and a rising bearish wedge is resolving to the downside, picking subwave bounces can be downright maddening.  We have seen some nasty waterfall declines in the past few years. The 2010 flash crash and the 2011 summer declines are 2 instances.

E-minis


Tuesday, October 23, 2012

Elliott Wave Update ~ 23 October 2012

Prices have now solidly closed under "QEternity" day and solidly closed under the 50 DMA. There was greater downside selling pressure today than Friday.


Squiggle count gets tricky. Due for a big bounce? We are not really oversold that much on any scale so its not necessary. However there is a big SPY gap down created by today's open and that presents a nice bull short term target.  

New resistance is "QE3 DAY". This is where prices would likely test if they bounce.


BEST BULL COUNT:
The best bull count is that today - or shortly tomorrow - we have finally seen the Minor wave 4 low.  This count does have something going for it in that prices finally overlapped with the previous subwave [iv] of 3 which is supposed to happen on a final wave 4.


DISCUSSION OF THE RISING BEARISH WEDGE:
Looking back over the past 2+ years, we have a rising contracting wedge.  Its there, it can be considered completed and we can ponder the subsequent price action that may or may not immediately come. Bearish rising wedges (if thats what it turns out to be) resolve in really only one manner: Prices collapse.

It was discussed a while back in a post on the possible wave and technical reasons why prices collapse so quickly.  The wave reason is that the waves are exhausted and no longer sport impulsing patterns up.  That has been the case when looking at the entire wave picture since that 1010 SPX pivot low of a few years back. Even the subwave moves sport ugliness. Note the waves since the June low - very ugly and that is useful in determining that a loss of impulsiveness (overall) may be waning.

Technical reasons of support/resistance are more complex in a wedge if prices go down. Simply put, there are no clear-cut "buy-this-level/pivot/trendline, etc."  From a horizontal standpoint support is muddled by all the overlapping price action of the past 2 years created by the wedge.  From a pivot level, the pivots are muddled for the same reason.  And since the wedge has converging trendlines, the lower trendline is coming up fast, so that doesn't really offer a whole lot of hope. In fact the lower trendline usually gets smashed right though  So there is not a multiple set of trendlines hanging out there to ride support on.

For these reasons, one can imagine that "stops", real or mental, are diffused throughout the entire price range of the created wedge.  The long slow price process of building the wedge also creates a sense of "solidness" throughout.  In reality, a rising bearish wedge is anything but solid underneath.  So all it may take is prices to start hitting the stop points and to start filling all those open SPY gaps and a cascade of falling prices can occur.

In fact prices usually decline deeper than where the wedge started. So ultimately sub 1000 SPX would be the price target of a wedge that resolves bearishly. And imagine all the stops at 1000 SPX....

DJIA shows the count as a double zigzag as another way to count since the 2009 low. Even though this is shown in a different count, note that like the SPX above, it counts pretty much complete and also sports a rising wedge in prices.

CONCLUSION:
1. The rising wedge must be respected for what it is: A potential deadly bear event waiting to happen (resolving the wedge).

2. Wave-wise, a wedge shows loss of overall impulsiveness and exhaustion. In this case the exhaustion is on a scale never seen - over two years in the making!  For this reason, we lose sight of the forest that the SPX may be trapped in.

3. Technical-wise, resolving a bearish wedge with a cascade of rapidly falling prices makes perfect sense. With no trendline support, no clear horizontal support and ambiguous pivots, stops are littered throughout the entire price range of 1000 to 1400 SPX.   There are a lot of open SPY gaps that no doubt hold clusters of stops. Once downside momentum is created, a price panic can happen quickly.

So will the pattern resolve to the downside in such a manner as I have described?  So far, so good. We have  prices struggling and falling away from the upper wedgeline and thats where its all starts.

All I am saying is that I respect the potential of a rising bearish wedge, particularly this size.  The bearish potential of resolving with a rapid price collapse is very real and of higher odds than at any other time or price pattern.

E-minis

Still holding major support.

Monday, October 22, 2012

Elliott Wave Update ~ 22 October 2012

End of day run for the 50 DMA.

Top wave count has the market topping in a truncated manner.




E-minis


Friday, October 19, 2012

Elliott Wave Update ~ 19 October 2012

This chart of the e-minis, all-hours, doesn't look like a Minute [ii] of Minor 5 pullback. The selloff today was quite bearish and inflicted some technical damage. So the evidence that the market has topped looks strong from today's price action. Yet we still require a lower low
The NDX is leading the way and well below its earlier 2012 high. The NASDAQ100 did deliver a lower low.
The rising wedge. Having a hard time with the upper wedgeline.
The best bearish count is that a wave (ii) expanded flat occurred and we are now in a wave (iii) down. If this is the case, prices are going much much lower. Note the high down volume ratio, etc. This is consistent with a wave (iii).
Wilshire 60 from the viewpoint that the market has topped. Still holding support as of the end of today.
And despite the $100 selloff of Apple it is still overbought on a monthly scale.
Composite long term. Technicals look like there are running out of momentum.




E-minis


Thursday, October 18, 2012

Elliott Wave Update ~ 18 October 2012 [Update 5:10PM]

UPDATE 5:10PM:
Bonds weekly. At the lower wedgeline. Things are getting interesting.
ORIGINAL POST
Primary count is Minor 5 up of Intermediate wave (C) of a double primary-sized double zigzag from the 2009 low.

Yesterday we projected that Minute [i] of 5 was about finished and then a pullback Minute [ii] was expected. Today's price action fits nicely into that count.  More pullback is expected. Target box is (minimum) the local virgin space for a wave [ii] pullback.
Overall count of Wilshire5000 wave (C) of [Y]:
Converting the same count to the SPX we get some interesting layouts with the Fib lines.   Wave 1 more or less at the 38% Fib. The "virgin space" more or less at the 50% Fib and wave 4 resides at 62% Fib.  We can then project the Minor 5 high based on Fibonacci  relationships and the "right look".

Minor 5 is supposed to finish higher than 1474. So .618 x 1 = about 1485.

But no matter, we are specifically looking for five Minute-sized waves from Minor 4 low of 1425 SPX. The waveform will be the key, not necessarily the price level.

TOP BEARISH COUNT
SPX 1425 must be broken to the downside. Simply put, we need a lower low. We cannot rule out this expanded wave (ii) flat.
Be on your guard for the most unexpected. And the most unexpected may indeed be a collapse of the market.  A lower low may start to trigger a cascade of stop losses.

We still have - after all - a valid rising wedge pattern that may be exhausting. People have tended to dismiss this wedge pattern particularly since prices have maintained for a number of weeks. However the wedge was over 2 years in the making so I really don;t know what is "acceptable" for prices to be hanging about the upper wedgeline.  It still "looks" right.
Local candle action within the context of the above wedge:


E-minis


Wednesday, October 17, 2012

Elliott Wave Update ~ 17 October 2012

Price action has been strong enough to surmise that Minor 5 up of (C) is tracing out a 5 wave pattern.

Remember the best count since the 2009 low is likely a double zigzag (two primary-sized 5-3-5 zigzags) cycle wave count.

The Industrials shows the count. The Wilshire5000 would likely also be labeled best this way. Remember, we already have enough waves in place to label this as is.

Using the Wilshire5000, we can get a detailed look at wave (C) of [Y].

Zooming in even closer we can see that Minute [i] of Minor 5 of Intermediate (C) of Primary [Y] has traced out five waves up.  I would expect a pullback for Minute [ii].

TOP BEAR COUNT:
The wave (ii) expanded flat is still of course a possibility.  It will take lower lows of course to confirm.

E-minis


Tuesday, October 16, 2012

Elliott Wave Update ~ 16 October 2012

Yesterday it was predicted a big up gain right out of the box would occur to fulfill a wave (ii) 3-3-5 expanded flat.

The wave pattern may be near completion.

Challenging the upper wedgeline again:
Technically the NYSE ended today at a 75% up issues ratio and a 79% up volume ratio. The NASDAQ was 63% and 65%, less robust.  So technically, this fits into a wave (ii) scenario with a big wave (iii) down coming.

The flipside is that this is merely wave [i] of Minor 5 up to a new market peak as shown on the Wilshire below. Minute [ii] would be a retrace down of the rise of the past few days.

E-minis