E-minis

Elliott Wave Update ~ 5 October 2011

The primary count is Minor wave 2 up. But just because we have called for a Minor 1 price low does not mean market bulls will rule the day and we'll see unicorns and rainbows. The SPX is probably due for a scary bout of selling sooner or later.  The Intermediate (2) rally from March 2008 to May 2008 certainly had its rough moments.

For instance if the market experienced a wave (ii) of [a] of Minor 2 pullback of 50-60%, the market is looking at testing 1100-1110 support.   Will that happen? I don't know.  We can only chart a squiggle at a time.  In general once we confirm wave (i) of [a] of 2 has topped we can look for perhaps as much as 50% pullback toward the 1074 low. That would be "normal".

Squiggle count as I see it now. I use the Wilshire for form.

Here is a smaller breakdown and it looks impulsive up from the low as we projected was due if this is Minor 2 up.

E-minis

Lower low yesterday.

Elliott Wave Update ~ 04 October 2011 [Update 8:12PM]

[Update 8:12PM: The Fibonacci ratios work beautifully at the 1074 low today.  We have [v] = an exact 1.386 Fib times the price length of wave [i] and we have wave [v] exactly .612 Fib times the length of wave [iii]. Additionally its been an exact Fibonacci 5 months of decline from the peak.

[Update 7:30PM: Most indexes have some kind of wedge. The tranports actually make a very nice falling wedge with a bullish engulfing candle from the low. And in DOW theory, the Tranports and Industrials have confirmed each other's lows and have signaled a bear market 5 wave move down.

And the biggest non-confirmation in the history of DOW Theory predicted this bearish move down.

[Update 7:23PM: GDOW weekly and daily. Its a valid 5 wave down pattern.

Possible daily count. Yes its a proposed ED also.

[Update 5:05PM: Tweaked the TLT count. Could be a bearish reversal candle today. We see how it follows through.

[Update 4:45PM: The NDX did not confirm the lower low. That could be considered a bullish non-confirmation. A proposed wave 2 flat is the top count.

ORIGINAL POST
I had been tracking a falling wedge ending diagonal triangle for Minute [v]. One trait of a falling wedge ED is the subsequent counter-move, once the ED is complete, is violent. The surge at the end of day was an amazing 46 SPX points within 46 minutes.   The post-wedge surge is very supportive of the idea of a falling wedge and supports the idea that Minor 1 has completed and the market is in the beginning stages of Minor wave 2.

Using the Wilshire5000 for form:

The final leg should count as an a-b-c. Here is the proposed count. I projected just such a scenario 2 nights ago

SPX Daily.  Minor 2 is the top count.

E-minis

Almost a new lower low in the e-minis vs. early August.

Elliott Wave Update ~ 3 October 2011 [Update 7:45PM]

[Update 7:45PM: The daily shows an "ideal" EW pattern to include a wave 2 up.

SENTIMENT:
There is a good deal of excess bearish sentiment in the markets to support the notion of a wave 1 low. Via Sentiment Trader we have a plethora of indicators and such in the bearish extreme ranges. Some of my favorite are:

Advisor and Investor Sentiment Model:

Composite Model (showing some positive divergence):

And here is the CSFB "Fear" Barometer. This measures how far out-of-the-money put protections from "zero cost collars" by institutional investors. Generally the higher the CSFB number, the deeper the put protection insurance and hence the "fear" of a decline. The lower the number, the less fear of a steep decline and less put protection insurance required. Anyways I may not have explained that quite correctly but you get the idea.

For instance the plunge to 1101 in early August alleviated the need somewhat for put insurance.  The index rose at the 1230 rebound high.  It is now steadily moving lower again. The Price ROC indicator though is not yet bottomed.

[Update 6:45PM: If this is the final leg of an ending diagonal triangle - wave (v) of [v] of Minor 1 - then each leg, waves (i), (iii) and (v) of [v] should be an a-b-c type pattern. In other words one key trait of an ending diagonal triangle is that the waves begin to overlap badly and the market loses its larger impulse look.

This chart below is based on my Friday chart

This implies that wave 1 low is very near.

ORIGINAL POST
The market has made a new low under 1101 SPX to confirm at least a 5 wave move from the 1370 high.  Question is at what price level and what form will wave [v] take? If its takes a falling wedge form of overlapping waves forming an ending diagonal triangle, it may be close.

If wave [v] "stretches" its legs a bit and forms a more solid impulse consisting of 5 subwaves within wave [v], we are looking at much lower prices than that of 1099. 

The e-minis need to make a new low under 1077 for it to form a wave [v] minimum price. Futures have dipped a bit since the cash index closed.  The e-minis can make a new low in A/H's is acceptable also.

E-minis