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Tuesday, April 14, 2009

Elliott Wave Update ~ 14 April

The Primary count has the SPX topped at 864 and a major retrace is occurring. The closely considered alternate is an ending diagonal is playing out and it will bounce off of my lower blue trendline I have on the SPX chart and make a new high potentially a small spurt into the 870's. This is how the ending diagonal played out in 2002 I showed on last night's chart.

I'll be watching a few things tomorrow. The banking index has a clear head and shoulders going on and broke through the neckline at the end of today. The lower H&S target is exactly at support at 30.95 which is the top of its recent ascending triangle. The banking index traced out a quick 5 waves out of its ascending triangle and met the ascending triangle breakout target so the fallback from peak was expected. If the neckline cannot be regained immediately tomorrow, count on a test of the 30.95 mark for sure. As I speak financials are selling in A/H's so the neckline moves even farther away.

The second thing I'll be watching is if there is one more up move finishing off an SPX ending diagonal move which, if it is to happen, would occur from where I placed a blue trendline on my SPX chart. Although I can count 5 waves from the 779 low (which is why I have 864 as my top - you have to go with whats there), the 5 waves from 779 structure does not channel at all really and one more up move would make a nice ending diagonal. But the market likes to keep wave counters guessing which is why I also check my Technical Analysis indicators.

The lower main channel was broke though today which I suspected it would and a struggle ensued most of the day to regain that channel. It failed. So thats another reason I favor a bigger pullback to come.

TA-wise, volume definately picked up today and it was a red bearish candle after a doji-type candle so that is bearish. I could show 3 -4 charts showing how the market is overbought but I could have shown the same charts last week and it still went up. But sooner or later there will be a near term top and I do favor 864 as already being the top.

I also haven't forgotten the gaps that exist above 800 (nor at 768) and neither has Mr Market Maker. Time for a few of them gaps to be filled.

Financials usually lag in any rally and they did on this last leg up. Well, they busted out of their ascending triangle and quickly met the target. So all market laggards have finished rallying. Now its earnings season, and let reality set in some more perhaps for a while.

The upside surprise would definately be having today's gap down getting filled prior to the next lower gap I show on the chart. That would be the ending diagonal move.

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