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Friday, September 20, 2013

Elliott Wave Update ~ 20 September 2013


1. Considering March 9th, 2009 was a cycle wave low, September 10th of this month kicked off the 55 month of rally.  55 is of course a Fibonacci number.  The 55th month of rally ends October 9th.  The market topped at a full moon and near the fall equinox.

2. Wave [W] took 103 weeks to its orthodox price peak to complete. Wave [Y] also has peaked in its 103th week of rally. The time ratio between the 2 are identical.

3. Price ratio between wave [W] (677 points) and wave [Y] (655 points) comes in at nearly a perfect 1:1 ratio (.967)

4. Wave [W]'s topping process took 21 weeks and produced a triple top. Weekly RSI produced a significant double negative divergence which displayed a slowing of momentum.  Wave [Y] has also triple-topped (in a fashion) in a span of 18 weeks and has produced an even more negative double weekly RSI divergence also showing signs of rolling over momentum.

5. MACD histogram since the entire 2009 low has downloaded and waned. It currently is negative on the weekly and shows a simple long term loss of momentum over the entire 55 months of rally..

6. Channeling between waves [W] and [Y] is nearly perfect.  The giant cycle-wave "three" pattern has produced this channel just as EW theory would predict. This channel and the large corrective in the :"middle" indicates a three wave pattern not an impulse. A three wave pattern - yes even a 1000 point rally - is a corrective pattern to the larger trend - which is down. 

7. Total volume has waned for 4+ years.

The above reasons are rather simple reasons but sometimes technicians and wave counters try and make things too complex. This is one time when perhaps all the signals are flashing a perfect warning sign.
On a squiggle scale, we have a nearly perfect - and appears completed - 5 wave move from the recent pivot low. That is also evidence that the current wave has ended.
As a bonus to our bearish setup as described above, the market produced a rising bearish wedge pattern complete with a bit of "overthrow". Now that prices are back inside the wedge, that is a possible indicator that it has completed.
Looking at a long term monthly chart also appears bearish. Note the waning volume. Note that this new all time high has produced the least momentum of the three major peaks.  The entire RSI indicator is flashing waning momentum as measured over decades.  The entire pattern looks ready to rollover.

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