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Tuesday, December 3, 2013

Elliott Wave Update ~ 3 December 2013

Looks promising for an impulse pattern down, and indeed you could probably already label it as a wave (i) or even just i - down. Bounced at various points of support both horizontal and trendlines.
The Wilshire5000, which by the way I think makes the most excellent trendlines and such for identifying support, shows that the "bear case" has its work cut out:

1. Prices are sitting on top of the cycle wave b upper channel line still. This needs to break first.

2. The pink line is also a support trendline. If pink breaks, prices will likely drop toward the lower red channel line and/or at the same time, horizontal support.

3. Probably the biggest support is where horizontal meets lower red channel line.  If this is broken, the market should likely develop even bigger bearish problems.

The call here is that the 3 things above will all likely happen because of the overall wave count both long term and short, and the extremely elevated sentiment that seems to confirm the count.
Long term dollar
Gold seems to be cooperating for now for the long term count lower.  Yes I am a deflationist first. 
The Wilshire 5000 monthly chart below shows a Supercycle wave (a) expanded flat. According to EW theory ratio analysis, Elliott Wave Principle page 139 mentions that "in an expanded flat correction, wave c is often 1.618 times length of wave a." If we use the 2007 price peak for cycle wave a, then cycle wave c under this ratio scenario would finish at approximately 4446 Wilshire points. This would take back the entire advance since 1995 which would seem likely because once the 2009 low broke there is no more support until that price range.

Also note the very neat hit on the RSI trendline.

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