E-minis

Starting to edge under support.

Elliott Wave Update ~ 18 November 2011

The SPX is above support. The wave structure since the 1292 SPX high does not look terribly impulsive down over the last few weeks.

It comes down to if major support is lost, a severe selloff Minor 3 down is not out of the question and in fact a very high probability.   1190 SPX is the lower price of the support range. The market closed a full 26 points above this price today.

However Minor 2 has had more than enough price retrace to be considered "done" at 1292 SPX.  The only question was time.  Though the last few weeks has kind of made up for the time factor.

Still, its probably best to slap a 2 at the 1292 and see if the market can best it.  If 1190 is lost, prices can run a long way lower.

E-minis

Elliott Wave Update ~ 17 November 2011 [Update 7:25PM]

[Update 7:25PM: One of my favorite wave constructs is the W-X-Y complex combination corrective pattern with a triangle in the final wave Y position.  If we imagine Minor 2 was at the 1292 SPX high, then the entire sideways construct counts well as a w-x-y wave (ii).   I'd rather label a bearish count in this manner than a series of 1-2's.

Wilshire used for form. A backtest of the broken barrier line would not be out of the question. One thing that cannot be denied is the bounce from the early October low sure looks like a "three" corrective no matter how  the sub waves are labeled. Therefore the even larger degree is down.

ORIGINAL POST
On the October 31st update, it was stated that:

"... the primary count is that Minor 2's price high occurred last Thursday at 1292 SPX. We'll go with that and see if the market can "best" it."

A few trading days later, even though prices bounced back above 12K DJIA pretty much as predicted, this blog doubted that the full force of Minor 3 down would kick in and that Minor 2 up may still be in progress. 

It was then suggested that a [b] wave pattern, later labeled as [x], may trace out a bullish triangle.

Indeed the market has held up in volatile trading and, in general,  a triangle pattern did emerge. 

But in last night's excellent Elliott Wave International update they mentioned that the Wall Street Journal had an article titled "S&P Forms Potentially Super-Bullish Triangle Pattern".   I so badly wanted to also mention that article and present it as evidence that the triangle was likely to go bust but I couldn't out of fair-use violations toward EWI. Simply put they had found it and posted it, I had no right to post it the same night.

After all, when even mainstream newspapers see the triangle, then its likely wrong. This is contrarianism at its simplest and it proved to be true.  

However there was some pretty good technical evidence yesterday that failure of the triangle was a good possibility and I therefore mentioned the high volume hourly selloff bar of yesterday afternoon.  If it had been a bullish (e) wave, selling volume should not have been that intense. Selling volume should have been drying up.

WHERE TO AND WHATS THE COUNT NOW?

A natural reaction and emotion is to just once again simply state what this blog stated back on 31st of October 

(paraphrasing here): Lets just slap a Minor 2 at the 1292 SPX high and see if the market can best it.

And to be quite honest, that is how I am positioned in general with my swing trading account.  I went non-leveraged weeks ago above 1260 SPX and that was probably good since the triangle would have chewed up a leveraged position regardless.

But all in all, major support between roughly 1190 all the way to 1215 SPX has not been yet smashed through.  The market is now a bit oversold to be sure short term so we could bounce.

LARGER FORCES OF MINOR 3 WILL EVENTUALLY WIN OUT ANYWAYS IS THE BIGGER PICTURE COUNT.

As I mentioned last night, no matter where 2 ends up, Minor 3 is predicted to take the SPX well under 1000SPX and likely under 900 based on Fib expansion ratios of wave threes.  

Daily shows the 50 DMA hit which was due:

Again, slap a 2 at 1292 and see if the market can maintain support, and eventually move higher to challenge 1290ish again. 

CREDIT MARKETS ARE STRESSING

Read Zero Hedge and Mish daily and you will realize why Minor 3 is winning out: Credit markets are deteriorating.  Keep your eye on the ball.

E-minis

The triangle still holds. 

2 keys price levels on the SPX is the 1226 (c) wave low and of course the 1215 (a) SPX low.

Elliott Wave Update ~ 16 November 2011

Triangle pattern is still intact on both the e-minis and SPX cash index as of this writing.  However....

Note the big down hourly volume bar in this afternoon's selloff.  If this is a valid (e) wave, sell volume should generally be drying up.  Its seems to have picked up instead.  And TRIN finished only at 1.47 so its not oversold by any means considering we have had record readings lately.

Another thing is E waves in triangles usually are not the "complex" leg.  So the triangle is in serious doubt.

Wilshire used for form:

SPX shows the key price levels for the triangle. Ultimately 1215 SPX pivot is the deal-breaker and bearish if broken through.

Very odd day considering Oil closed up 2.35% and equities closed down over 1.5%.

It takes a lot of nerve to "trust" in this triangle to the upside considering the huge credit stresses occurring in the credit markets. I don't have those kind of balls. I give credit to those that do.

Ultimately the triangle should not produce much more than a zigzag thrust up even if its successful. So I remain ultimately bearish in that Minor 3 down's force should soon be felt no matter what exact price we mark Minor 2 high at.

The bigger picture count must not be forgotten:

E-minis

There is a triangle forming. Question is, which way will it ultimately break? I give the benefit of the doubt to a continuation triangle that breaks to the upside since the previous trend was a strong updraft from the 1074 SPX low and the market triggered a Zweig Breadth Thrust signal. Thats the simplest way of looking at it as it stands.

Possibly the (e) wave is forming its own triangle: