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Tuesday, June 30, 2009

The Head and Shoulder Pattern

Even EWI has posted on the SPX forming a head and shoulders chart pattern. The DOW would be a big bearish H&S also. The Nasdaq doesn't quite fit so well.

If the H&S pattern formed (good chance it will) the contrarian stance would be to play the long side. The H&S downside target would likely be in the 820's somewhere. 821 would be a 1.618 Fib expansion target of the zigzag from 956 to 888.

I have already stated that if P2 is not yet peaked, then it would likely require another zigzag up in a triple zigzag pattern. I have also stated that it doesn't make much sense for a third zigzag to start beneath where the second one started as would be the case if a H&S pattern played out and its downside target were met.

So therefore I don't like the H&S. Its too obvious. Once a pattern becomes so obvious, so early, by the time it is ready to "break" and follow through, everyone has already taken positions long prior to the "break" point. So therefore instead of following through on the pattern, it does the opposite because everyone was already positioned for the move well ahead of time. That's one theory anyway on why chart patterns sometimes fail miserably.

Bearishness is already getting lower on the $SPXBP chart (again assuming 956 is not P2 peak).

What is instructive though is if the market is tracing a Y wave, it could hold above the H&S neckline (or a false break under that recovers) by tracing a triangle or a flat pattern for the Blue Y wave. So indeed I'll be watching closely.

In conclusion, if P2 topped at 956, then a move down to 821 will eventually have to occur, that much I admit and am ready for. But I suppose if P2 is not topped. I lean toward a new high this summer based on what appears to be a zigzag down from 956 to 888 and subsequent X wave back up. Also I pay EWI a lot of money for their services and they say P2 likely has one more rally this summer based on their expert sentiment readings ans experience) so I blame them LOL! So then the 820 range, in my estimation, would have to wait a while longer.

But one subwave at a time. Again, I am way ahead of myself and if the market wants to bust lower through 875, who am I to say that shouldn't have happened?

Looking for The Blue Y Wave

I bumped up my labeling of the recent rally from 888 and on this chart I show a blue X wave peak at 930.01. 930.01 is exactly .611 retrace back toward 956. Very close to a perfect .618 Fibonnaci. What that leaves is the blue Y wave. What form that will take we do not know yet. But as part of a proposed double three corrective pattern it can be another zizgag, flat or triangle.

So the most bearish form I can make for the Blue Y wave would be another 5-3-5 zigzag down which would break lower than 888 recent low. I show this bearish option on my chart. I have 862 as the low. I achieve that target with a simple Y = W.

But like I said, one subwave at a time. But I want you to see what my top count is at the moment. And that is a blue Y wave playing out as part of a double three (or double zigzag) down from 956 peak.

Elliott Wave Update ~ 30 June (Update - Squiggle Added)

UPDATE, 7:30 PM: Added a squiggle chart. Just looks like a bunch of zigzags.

Going to keep playting this one little wave at a time. Today moved just as I mapped: peaked between 929-931, retrace back to 914 area. The hard drop surprised even me it looked like a waterfall.

So the retrace back up from 912.86 is probably almost peaked unless a more complex corrective unfolds. The waves up look corrective so another move down in either a (c) wave or a wave (iii) should be coming. Downside targets are 902 for starters then 892, just above 888.

So either a small zigzag is tracing out down from today's 930 peak or something more bearish. I won't try and guess what it will be other than I will play this one subwave at a time.

So far its working pretty good. I'll throw in the squiggles later.

Monday, June 29, 2009

Lets try that NASDAQ Squiggle Chart Again

Over the weekend I speculated that the NASDAQ peaked in an ending diagonal move. I think I was on the right track but I simply had it labeled way too early. Thats a typical probelm with wave counts sometimes particularly with ending diagonals or leading diagonals. There is still solid evidence that its an ending diagonal. Lots of overlapping waves in the move up of the last few days.

If there is one more new high tomorrow that would be the ending diagonal high. I can see a count where today is the ending diagonal high so the jury is out. So I am agnostic.

It would make sense I guess that a corrective down move would come on Wednesday and Thursday, first days of the new quarter and right before vacation holidays. But the market never makes "sense" does it?

Elliott Wave Update ~ 29 June

Well my Friday chart

pretty much followed through with upside. I really wasn't sure which way it was going to go. I guess it was a wave [1] leading diagonal versus an ending diagonal as I speculated on the NASDAQ. DOW up today 1.08% SPX up .91% and NASDAQ up only .32%. So the DOW was lagging and catching a bit of a bid and the NASDAQ is waning and the SPX somewhere in the middle. Still looking for the initial rally peak from 888 low. Could be tomorrow with one more squeaker up. End of quarter window dressing I guess.

There exists some nice Fib relationships coming up and I show this on the chart. 929 stands out along with 931. So maybe a peak tomorrow and then its starts heading back in some kind of retrace move.

There are numerous possible counts going on and they all steer corrective as if this is just another big consolidation for the market prior to making one more zigzag (should be at least a 100 pointer) for P2 peak.

I will look for a move back to at least 914 support after the market hits 929-931 range tomorrow (if it does) That would be a 38% spot and also a good support area. After that we gotta keep playing this one wave at a time until it reveals some more of whats going on.

Sunday, June 28, 2009

Divergence Between The Indexes

The move down from peak has been uniform between the indexes. All 3 traced out very clear 5-3-5 zigzag patterns and dropped fairly equally. But since that low a few days back, the DOW actually made a new low since. The SPX and NASDAQ did not. Also the 2-3 day rally has diverged as the NASDAQ retraced more than the SPX and the DOW is lagging. You can see all three on the chart.

A fractured market is not healthy market as EWI likes to always point out. So its hard to say what the outcome will be, but its not a bullish configuration. In any regard, the DOW traced a very awesome 3-3-5 textbook expanded flat. It did not make a new high on Friday.

The end of the quarter "window dressing" may have something to do with the wide divergence.

What I am not sure of is my degree markings for the recent 2-3 day rally. Is it a Minor X blue wave back up and we await what form the Y wave will take? Or will the DOW rally while the NASDAQ pulls back and the SPX trades sideways and an X wave peaks for the DOW a day or so from now?

Regardless look for a continued fractured market (or not - in either case its a clue). If the NASDAQ drops 2% and the DOW only 1%, that means something. What just yet I am not sure. Either way the divergence paints a more bearish picture than bullish.

Saturday, June 27, 2009

Google Top 25

If you do a Google search of "Elliott Waves", danericselliottwaves comes up #25 (on page 3). I am not sure what to make of that. I guess its pretty decent and a pleasant surprise.

I want to thank all those who have graciously donated to this site. It really helps pay the electric bill and such and keeps my better half off my back as I devote a lot of time. I'm just your average Joe kind of guy and I really don't trade a whole lot, at least not yet. I'm still learning. I haven't been doing this stuff (EW) yet for a year. I only started last August in earnest and my early charts are kind of funny (not that I still don't crank out funny-looking charts!). The time seems much longer as I have looked at every squiggle ever traced over that time.

Here is an early example. I must admit, I recognized the correct form of Primary wave 1's extended third wave structure earlier than most. Even before EWI I think.

But Elliott Waves is a passion of mine and sometimes, yes, I can get burnt out and "off the trail". However, I feel I'm back in tune somewhat. SPX 1000 may or may not be hit, but I think they surely will try sometime this summer.

So far the drop from 956 was surely looking bearish and a possible P2 top until the extra burst the market found these last few days. The burst eliminated the most very bearish possibilities (a giant 5 wave move to start P3), even if there is more decline below the recent lows.

Anyways, I work during the day and my time is limited I wish I could devote more to everyone who ever emailed me or posted. I am grateful to have a day job by the way, its tough going out there. I do read everybody's stuff.

Thanks for helping to make this site successful!

The NASDAQ Charts

The NASDAQ appears to have ended Friday in an ending diagonal move on the squiggle chart. Which likely means that the SPX also will not be heading up much further if it does and 922 may have been its corrective high.

One thing we can eliminate from the NASDAQ is that this isn't some second wave situation in a giant 5 wave move down setting up a "third of third" move. That count no longer works because the NASDAQ breached a new high as compared to its [b] wave rally last week.

So what is happening? I suspect that Friday was a Minor blue X wave peak and now the market is looking to trace out a Minor Y wave to find the red (X) wave orthodox low. It can take any form as part of a double three: flat, triangle or another 5-3-5 zigzag. Only the 5-3-5 zigzag suggest that the recent 1753 low will be taken out to the downside and it very well may be the pattern it traces.

Also why I think its a Blue X wave (which means the SPX and DOW also made blue Minor X wave peaks or will shortly) is because I am finding I am charting very small degree labels on my squiggle charts which I usually don't have to do on this P2 rally. So funny or not, somehow my gut tells me I should bump the degrees up one notch. Which leads us to an Minor X wave peak due to what looks like ending diagonal moves.

Once this next corrective Minor (Y) pattern plays out, its likely an red (X) wave orthodox low and the market will launch on a last zigzag up to new market highs in a giant triple zigzag to p2 peak.

Friday, June 26, 2009

Elliott Wave Update ~ 26 June (Updated 27June)

UPDATE (SAT 11:30): I made a new post on the NASDAQ and it appears the market is indeed about done with this corrective move up. So the SPX 1 munte I have here likely has the last set of moves up mapped wrong. I think Nate's ending diagonal works well. 922 could very well be the high or very near so. We'll know early Monday of course.

Well today dipped early, not as low as I had thought it might (but close) and then rebounded. But not as high as I speculated to 930+. However the SPX did achieve a new afternoon high. The DOW is diverging. Its a problem for the market. The DOW still has yet to have its "golden cross" moment, although it too cannot be stopped from happening. Its just going to take a bit longer.

What will Monday bring? Well the VIX again closed under its BB as Kenny pointed out (and EWI). I guess a fear bounce is due of some kind. Any market decline will of course depend on how much sellers outweigh buyers (duh!). My point being it does not mean the SPX will collapse 50 points from here (but of course it could).

So Monday is unclear. Overall I am looking for an [a] wave peak (922 today may have been it if stocks take a dump Monday) and then a [b] wave pullback. So the market could push early for an [a] wave peak and then reverse hard on a [b] wave pullback. How far back I am not sure.

If 922 was the [a] wave peak, then perhaps Monday opens bearish and heads down in a [b] wave retrace back down. If a 50% retrace back toward 888 occured from 922, your looking at roughly 905 area. If the market peaks at 934 Monday and a 50% retrace occurs then its back down to 912 or so.

My 1 minute chart has the market in a Monday bullish configuration. I'll have more this weekend, got to look at some more stuff.

Thursday, June 25, 2009

The Vix Chart

They say you shouldn't apply waves to the VIX but I cannot help it. I posted a chart a while back in March and proposed a double zigzag down from VIX peak:
Well, I present today's updated chart and I must say, it looks pretty decent. The VIX broke out of a trinagle move. Question is, was this a B wave trinagle or a 4th wave triangle?
The difference is a B wave triangle means a drawn out final C wave down to VIX final low is coming and should take weeks to play out.
However, if my pattern is not a B wave and instead a final 4th wave triangle, that implies a quick thrust move, such as that has occurred is all she wrote for the VIX low.
So once again, you can see how the market is at a decision point. 4th wave or B wave? The VIX is a key chart to keep and eye on over these next few days.

Squiggles (updated)

EDIT 945 PM: I added a chart someone had a question in comments. The chart is highly speculative of course showing a Minor blue B wave move toward 950 of an (X) wave flat scenario. Note the invered H&S I mapped.
I am learning more complex EW theory such as the rule of alternation between simple and complex wave structures. Its part of basic theory that the market alternates bewteen the two. Why? I suppose life works that way, hence the market reflects that. Don't you have moments of clarity interspersed with periods of complexity?

For instance today was a simple 5 wave move, a very good structure. The corrective waves since today's high therefore appear to be complex including a possible [B] red wave expanded flat.

I look for a backtest of 908-911 support. Then a move toward 927 resistance area. A push above could occcur and then of course my count calls for the double zigzag peak. If this pattern played out and the market pushed to 931 or so, look for a downward corrective move of the entire push up from 888.

This all supposes that 956 is not P2 peak. If 956 is the P2 peak, than just the opposite will happen. 927 will not be broken and a big bear wave down is coming (I do not completely rule out the alternative until the waves cancel that option). And 927 is the keystone.

See how simple that logic is? We can afford that luxury at the moment.

Should be a fun day tomorrow.

Elliott Wave Update ~ 25 June

Counting wave patterns is like building a puzzle. It based on logic. Wave structures build and form bigger wave structures.

In review of what has happened since the 666 low, it appears the market traced a double zigzag from 666 to 956. That "qualifies" as a valid corrective for P2, yet since P1 was such a long (17 months) decline and in points, P2 logically should rally a certain percentage. Simply put, if 956 was not enough of a point retrace (or June 11th high was not enough time) the market will trace higher at some point.

Logic also states that since this is a wave 2 correction of large magnitude, if 2 zigzags cannot achieve an acceptable price retrace high than the theory allows for a triple zigzag. That would be the limit.

The connecting waves between each zigzag is an (X) wave of intermediate size (red letters on my charts). So if 956 was the high of a double zigzag, and we assume that the market needs to trace a triple zigzag, logic tells us that the second (X) wave low should not fall too heavily in price. Afterall, why would the last zigzag start its move from the same place or even lower than where the second zigzag started its move? That would defeat the logic of a triple zigzag (to achieve a high price). A low starting point for the final zigzag would force the last zigzag to be a powerful one which normally the first zigzag would be (as it was here). That's asking for a lot.

The start point of the second zigzag was either 835 or 847 depending on where one places the first orthodox (X). So using logic, if we take 847 as the start of the second zigzag to 956 peak, 888 is exactly a .62% retrace back toward that 847 mark. Should we expect more of a retrace back toward 847 before the launch of a third and final zigzag to P2 peak?

I suppose it could trace more backwards however, remember the logic: If one expects P2 is not over, than one must expect a triple zigzag to peak. And one must expect that the last zigzag will not start from a low spot as compared to where the second zigzag started.

Based on that logic, 888.86, being an exact retrace of .62 back toward 847, makes a good spot for an (X) wave price low.

Once again building on logic, the move down from 956 to 888 was a nice 5-3-5 zigzag which qualifies as a corrective pattern for an (X) wave. The question is: was this enough retrace in time? Are the bulls ready to stomp on the gas pedal yet again so soon? That is something the waves will reveal soon enough.

The (X) wave could carry on for a few more weeks or longer, yet not move below 888.86 (or perhaps just a little dip). For instance an (X) wave flat could carry prices back toward at least 950 and then a bearish C wave take them back toward 888 before ending. Or perhaps the market will start to triangulate and go sideways in yet another triangle move for a few weeks until a breakout move comes later.

Today's waves broke up and over the down channel and was a 5 wave move up. Is this the start of a new move to P2 peak? I honestly do not know just yet. The 10day $tick average had dropped to a very low spot and as Kenny showed, was at a spot that could be a market turning point. In addition, the VIX shows no fear. It appears to have triangulated recently itself as I showed a few days ago and now may be breaking lower.

Like I said, either P2 has peaked or it hasn't. Simple logic. And if it hasn't peaked, at some time the market must turn back up. And that last move up should be a zigzag up (probably about 100 points in size or more I suppose). And the start point of that last zigzag should occur from a decent price point that is not at the same level or near where the second zigzag started.

I never favored the end of P2 at only 956. I favored a move higher toward 1000. It didn't happen when I thought it might, but it may be happening now or will happen in few weeks or so after a sideways consolidation. I suppose the market, in addition to needing more price retrace, needs more time for P2.

The bearish count of some kind of giant 5 wave move down, which of course implied that P2 had peaked at 956, has almost been totally eliminated by today's move up. If 927 gets taken out to the high side, it will be confirmed. So again we wait for some final clues.

So that's the logic. P2 ended at 956 or not. There is no "in between" option. EW theory favors a higher price retrace and/or time for P2. There is no hard rule of course.

My logic and today's wave moves, (including all the TA and bearish sentiment) steers me toward another zigzag to peak will occur. When? When the (X) wave ends. Did the (X) wave end? Not sure just yet.

Is there still a chance for a giant 5 wave move down and that P2 topped at 956? Yes but only if 927 does not get taken out to the high side and the market moves down in one more 90% down day in the next few trading days.

The market is now well above the golden cross of the 50/200 DMA. A 90% up day from this configuration, will turn traders and fund managers and technicians and market letters bullish. And that's the way a P2 should end, on a very high bullish state of things.

Wednesday, June 24, 2009

Elliott Wave Update ~ 24 June

UPDATE 5:15: I updated my 1 minute chart (comment and a trendline)

Wave evidence since 956 top: Impulsing down in 5 wave structures and correcting back in 3 wave structures. That is very bearish and supports further decline is coming. Today's squiggles still supports that view. Until that trend changes, the Primary count will have to remain bearish.

Tomorrow is a key day. There will soon be the "third of a third" wave moment if the Primary count holds true. These are whats known as "points of recognition" as EWI likes to say. These are the moments that usually occur in the "third of a third" wave down in which the market realizes that its in trouble. Movement is swift and powerful. A 90% down day is typical.

This will be occurring right near an upper channel trendline. If the market can break out of this trendline to the upside, that would signal something else is happening likely a further correction higher and it indicates the severe downtrend will have been stopped and 888 will hold for a bit as the low. A break out of the channel allows the market to form more corrective structures (sideways) to allow an eventual move higher than 956.

So its come down to a decision point for the market: It either breaks out of the larger bear down channel or succumbs to a nasty wave [iii] move lower. Strictly looking at the wave evidence, the primary count is that the down move will happen.

If ever the market requires upside surprise to save the bear rally from being potentially ripped to shreds, the moment is now.

Tuesday, June 23, 2009

Elliott Wave Update ~ 23 June

Last night I threw some charts up with a bullish count with the thought in mind that P2 was not yet topped and that at some point, the market will have to rebound for the final leg of P2 in a triple zigzag to P2 peak.

However, the waves have yet to cooperate. Every bounce since the 956 high has been of the dead cat variety and today was no exception.

Tonight I take a different slant and show the waves from a permabear perspective (which I am by the way). I show you the wave degree labels that would most likely fit into a P3 scenario. The initial 53 point move down from 956 peak would only be Minute wave [i] of Minor wave 1 of Intermediate wave (1) of Primary wave [3]. The rebound to 927 would be Minute wave [ii]. That would mean the market is in the midst of a Minute wave [iii] lower.

There really would be no other way to interpret the structures if 956 was the true P2 top. You could change the degree labels and bump them up one level, but regardless the market has reached the point where a "point of recognition" is coming at a small-scale level (if this is the true count)....the meat of a wave [iii] move lower. This would of course most likely bust down through 878 support lower.

So what do I think? It doesn't matter what I think. What only matters is what the waves are tracing out so far. And so far the market is impulsing down in very bearish 5 wave moves and correcting in scraggly ABC's. Today was no different.

We will know soon enough and I have to show you both scenarios.

I'll add that yes the 50/200DMA crossed today yet on the hourly chart, the 50/200 crossed today in a bearish manner. I will also say that the market is "oversold" but that doesn't matter much if this is a wave [iii] lower. We seen in P1, how "oversold" gets even more oversold until you lose all your money.

In the long run, P3 will kill a lot of people basing bounces on basic TA but a wave 3 of any size will crush bounce expectations. I must not fall into that trap and must stay in tune with the waves. And so far, they ain't a pretty picture if your a bull.

Its this simple folks: Either P2 topped or it ain't. There ain't no "in between". I'd say within a week or less I'll chart which one it likely is. But for now, the market is teetering on the edge of a break much lower in the meat of a wave [iii] move (or even the meat of a wave C move if you desire).

The bulls still have time to recover, but they better get their act together quickly or risk losing 875 support, a key level, altogether.

Bulls Need to Close above 50/200 DMA

The "golden cross" has occurred on the S&P500. The 50 DMA at 899.33 has crossed the 200 at 899.02. Two problems with the setup though: 1) The market is trading below both and they are acting more as resistance. 2) The 200DMA is sloping down (that cannot be helped at this point).

So I certainly recognize that the setup is far from ideal. All I am suggesting is that it is worth noting as every other trader and fund manager in the land will also have noted. The NASDAQ had its cross a few weeks ago. The DOW is lagging and has some serious work cut out for it to have a crossover moment. So the market is certainly fractured on this TA event, which in itself is bearish.

The key thing for the bulls today would be to close above both after they have crossed. That would be a first step in repairing the bear rally.

The second step down the road would be to have a 90% up day while above the golden cross.

So in simpler TA terms, that is what has to happen for P2 to make a final run to a new price high if it is to be.

Will it happen? I lean obviously toward one last upside surprise and that P2 is not over. But I am certainly not married to that idea. I am just waiting for the wave evidence to continue to pile up to support one side or another.

Another 90% down day while the market is under this golden cross will certainly help drive the 50 DMA back under the 200DMA so it would be a false cross.

So one more 90% down day would be very bad for the market indeed. Indeed P2 itself.

Monday, June 22, 2009

Bullish Leanings

Update: Also McClellan's, ($NYMO) a popular oscillator, is oversold.
I have bullish leanings (wave-wise) based on a few items here and the charts Kenny has shown over the weekend.

1.) Daily SPX chart. 50/200 crossover. This technical aspect hasn't happened in a bullish manner since Sep 2006. So I have to respect that potential. It should cross tomorrow. Also total down volume (as opposed to advance/decline ratio volume which was of course very down today) patterns are not yet indicative of a P3.

2.) $BPSPX. This has now corrected the farthest down since P2 started. Its more on the oversold side than not. Of course this does not tell you how prices will move, but if bearishness is back in vogue, and this is not yet P3, then logic tells me a bounce will happen that will allow the market to trace the final zigzag up to P2 peak sometime this summer. So based on thinking this is not yet P3 (we'll know here this week!), shorts beware.

3.) VIX. I showed this on tonight's update but didn't talk about it.

It seems to be triangulating again. And its not a bull triangle....its a continuation triangle and whenever it plays out, it will break lower. This break lower would most likely coincide with the breakout of a final ABC move to P2 peak.

4.) The e-minis hourly stochs and MACD is once again both on the floor together and when they are like that, at the very least, a dead cat bounce is in order.

5.) Daily tick, at -1101, the lowest since P2 started, is due for a bounce. And the market has support layers between 875 and here.

All in all, it points to the likely second Intermediate (X) wave of the P2 rally is tracing out in a (likely) triple zigzag (rare) to P2 peak. When will the (X) wave find its low? I am not sure, I listed some possibilities on my daily update.

Of course, if only a dead cat bounce occurs and then the market powers right down through 878 in a "third of a third" move, then there is a good chance all this is for naught and it is evidence of P3. But until that happens, I see no proof yet P3 is in motion.

I think the bottom line is be prepared for upside surprise. We really haven't had upside surprise in a while.

The Very Bearish Count

The very bearish count is that the market is of course in the beginning stages of a P3 wave. In fact if this was the count, then after a dead cat bounce, a big move that slices through 875 will be coming very soon.

Technicals though don't favor this. But if it was P3, technicals can get trampled as we saw in P1.

However the market is kind of short term oversold. Bullishness has plunged and bearishness is back in vogue....That of course would be a perfect setup for a reversal higher somwhere along the way. However you need buyers of course.

Elliott Wave Update ~ 22 June

I expected today to be a down day and it did not disappoint. The move next is the hard part in this count.

There are several ongoing possibilities:

1) A Minor ABC 5-3-5 zigzag has traced (or almost finished) from 956 high for an (X) wave low meaning the market will reverse and head to new highs.

2) A Minute [a][b][c] zizgag has traced out either a Minor A or Minor X wave from 956 peak and the market will rebound to either 928 or back toward 950 and continue a corrective move for the next several weeks . After the correction, the market breaks higher in a final zigzag move to P2 peak.

3) This is just the middle of a nasty Minor wave 3 lower and after a slight dead cat bounce tomorrow (a pause), the market heads down much lower in the coming days.

I do not favor option 3) but I must mention it and by no means can it be ruled out. I favor option 2) in that the market will bounce (perhaps a new low will finish tomorrow early) back toward at least 928 in the coming days. How bullish a bounce I am not sure.

As far as degree labels, my 30 minute chart looks correct and it is different from my 1 and 5 minute charts as far as degree labels. Overall I suspect a bounce is coming (maybe tomorrow has one more lower move coming early). The 50 and 200 DMA will cross in a bullish manner (even though the 200DMA is still sloping down) and its the first time thats happened since Sep 2006.

Intraday Squiggles

Home from work early, couldn't help but chart the squiggles hehe.

Friday, June 19, 2009

E-minis volume levels

Some simple stuff here but worth pointing out: Look at the volume bars I have in the middle of the chart. The last 2 green up days were lower volume than the 3 down days previous.

Granted this is e-minis and not the cash index but its a good indicator since today's quad witching day brought out more SPX volume. So the e-minis may be a good sentiment indicator for the past few days. And its shows that there are (were) more sellers than buyers for the moment. That is bearish for the short term. And today was even less than yesterday. These last 2 days are textbook low volume patterns of a corrective move back up which signals that buyers aren't yet interested in buying at these prices.

SPX Bullish Percent Chart

Bullish sentiment on this chart has finally broken down and moved beneath the 50RSI mark. Its still above a typical "bounce" point. So this chart supports a further move down to more bearishness.

As my notes on the chart say, the SPX has fallen only 30-some points from its high (today's prices not the recent 903 low) yet this chart shows bearishness is getting lower. Yet prices are not too bad in the overall scheme of things. Just might be a nice clue that this setback is just an ABC correction that will turn back to bullishness soon enough.

EWI shows the Daily Sentiment Index (DSI) is back down from 86 to 68 so that has started to correct. No telling where that needs to go for a turn back up in a P2 wave.

Question is again, how much will price retrace? Well, sentiment on this chart went way down and price is still above the 50 and 200 DMA.

So its a matter of total volume (particularly to the downside) and support. So far everything seems in line for a bit more of a bearish pullback to get to that bearishness that allows a bullish turn. How much and how extreme? I'd guess the market finds its ultimate support at yet again at 875 or above. Its a logical guess. Why? Well the market is about ready to have a 50/200 crossover and I cannot see it getting too far out of hand to the downside if that's going to come in play for the rest of the move of P2 to final peak this summer which I think it will.

PS - I had favored a bullish extreme over the last few weeks to happen sooner rather than later and a move toward 1000 that never quite made it obviously. I can live with 956 being a P2 top, but I cannot say it is so at this point. Obviously more of a price retrace toward at least a 38% target 1014 would be more satisfying for P2. The market left us hanging and wondering, which of course, it likes to do just when we think we have it nailed down.

Elliott Wave Update ~ 19 June

Well, the market did a nice little 3 day retrace back to the previous 4th wave subwave at 928. That's what was called for and it complied with it. The waves look obviously corrective since the 903 low and I cannot find a bullish alternative at this moment.

So....Monday *should* be a decent down day. That's according to the wave structure. I'm not going to try and outguess the wave structure, I'll play it straight here. The TA supports a down move come Monday. Either its the beginning of a C wave or a wave 3. Both can be powerful. However I favor it being a C wave.

The 50/200 crossover I talked about the other night will happen early next week. I suppose the market will drop down and meet both. I show an updated daily of the chart I posted the other night.

So in review, the market will probably head down a bit and visit the 50/200DMA area. What it does when it meets them is anyone's guess. For instance a C wave is sometimes only .618 times the length of A. That would put a down move C wave to 894 using today's high as a B wave. And that would be a break below the 50/200 DMA. Maybe it does that and bounces.

Thursday, June 18, 2009

Elliott Wave Update ~ 18 June

A bunch of zigzags that are struggling to gain altitude. 38% retrace has yet to be hit on the SPX. I favor one more zigzag up to finish off a wedge move and a proper Fibonacci retrace of at least 38%-50%. The market cannot seem to attain a price retrace so I have the 1 minute chart as a double zigzag so far and a triple is max.

If another zigzag up happened, it would be a good place to load shorts but the market may do one of 2 things: a) not make it up there for you to conveniently short (and reverse hard down and make you chase!) b) make it up there and squeeze the crap out of your position and make a bunch of weak hands choke and cover (this would be whats known as "overthrow" of the wedge on the final move).

I guess whatever the mood of the moment is.

PS - i am not sure of my degrees of wave labels. That'll work itself out though.

Wednesday, June 17, 2009

Elliott Wave Update ~ 17 June

Taking 956 as a peak (time will tell if its P2 peak or not), I can count a pretty decent 5 wave move off the peak. You can see a clear channel that the SPX is still obeying. If the market cannot break out of this channel tomorrow, then the move down is still advancing and I will likely re-label where I currently have wave [v] as a wave [iii] low. If that's the case, wave [v] target would be around 898 - 900 or just below today's low.
The ending wedge-looking move should signal the end of a wave [v] though. So that's another clue that I have the short term labels correct.

So watch how the upper channel on the chart behaves.

Tuesday, June 16, 2009

Michael Ashbaugh Technical Indicator

A day late (its one of his free samples) but this guy always sums up the technical situation in a simple, straightforward way.

In a nutshell here are some key points he makes:

1) Since breaking above the 200DMA, the SPX has failed to have a 9 -1 up day. (90% up day is a "standard" and is one reason why Kenny called P2 earlier than most and why I too suspected P2 had started - because 2 of those 9-1 up days occurred early in P2) Its had 2 weeks to do so and failed.

2) If the bears manage a 9-1 down day (Monday was a 15-1 down day) while the S&P500 is below its 200 DMA (at 909) than that is technically very bearish.

He does make the point and recognizes that 908 - 914 area is a "key" spot for the bulls short term. If this is a "B" wave low in a final ABC move to peak, then this area must hold.

This also matches up perfectly with Kenny's support chart showing the same thing

We shall soon find out.

(Updated) Elliott Wave Update ~ 16 June

Update 7:30 PM : As I say in my post and as Kenny suggests, this still may be a B wave low in my version of a double zig zag to p2 peak as I have been outlining and suggesting for several weeks.
But the market is going to have to start to recover fairly quickly and cannot absorb too much more price damage I suppose. Last night I said my "uncle" point for this being a B wave low was about the 200DMA. And we are almost there. So tomorrow is the key for that count. A nice bullish recovery will bring this double zig zag to P2 peak potential back to the forefront. My chart I posted tonight is largely what I am "looking ahead" to if this count fails.

There were 5 waves down from 956. I am not sure if this is a 5 wave move or perhaps an unfinished double zigzag such as the one in early May that traced from 930 peak down to 878. If it was a 5 wave move, your looking at a potential retrace to the 928 area.

Whats the overall count? Well there are several variations. I have covered them well enough off and on in the past few weeks. My main theme was a double zigzag to P2 peak. Even though my version of a double zigzag is in jeopardy of going down in flames (I haven't quite crossed it off the list) there is still a valid count for a double zigzag (EWI's count). Basically I show that on my chart tonight. But, I'll hold off on an overall count and rather present something I haven't talked about yet technically.

The last time the 50DMA crossed the 200DMA in a bullish manner was in September of 2006. Almost 3 years. The market will be soon on the verge of doing the same. The harsh bear moves are trying to prevent this from happening but I am not sure that it can be at this stage. A crossover is going to happen one way or another.

Did P2 retrace high enough in both time and price to be considered over? I am not sure of that answer. I was hoping for a few more bullish weeks and a higher price closer to 1000 but the market is in danger of not sustaining the breakout run (unless it reverses real quick!) for the short term.
So stepping back and just looking at the wave structure in a simple way one can see 2 zigzags. I have shown variations of this before. A P2 which cannot retrace in price on one ABC move will trace a second zigzag and if need be, a third zigzag which is whats known as a triple zigzag.

Tying the two themes together of a 50/200 crossover with a second (X) wave allowing a triple zigzag to a proper P2 peak is something I am mulling at this stage.

So you can see a general battleground may be setting up. The market will likely seek support from both the 200 DMA and 50DMA and oscillate about the two for a bit. These oscillations will result in some kind of second Intermediate level (X) wave before finally bottoming somewhere above 875. This (X) wave could take the form of a 5-3-5 zig zag (of which the first 5 wave move down is over or almost over) or something more complex. And then the market will begin its final zigzag to a P2 peak in a triple zigzag move which will eat up more time (which is probably also a bit on the short side for P2 at this moment) and a higher price retrace.

It really comes down to this simple question: How much price damage can P2 absorb before it can be considered unrecoverable? In my estimation, for a triple zigzag pattern to have a chance of playing out, 875 area should hold firm.

P3 may have already begun. I am under no illusion that the market *has* to do anything. But that evaluation can only come when the 50/200DMA crossover battle is resolved and if 875 support breaks. So its way too early to say.

Monday, June 15, 2009


I usually have 3-4 things going on in my head (wave patterns) at a moment's notice on any potential wave structure. Sometimes I try and convey all that is up in my little noggin but that can confuse the non Elliott Wavers if I throw every little potential up there.

What is showing so far is that the move from 956 has perhaps completed 3 waves so far. 3 wave structures can be considered ABC so until the market makes another move lower than today's low, the jury is out.

In a well constructed impulse structures (in either direction) a nice subwave structure can be seen and channel lines develop. The move down from 956, although harsh is not clearly defined in its subwave structure. Its not the cleanest pattern I ever saw. However what is obvious is that there are 3 clear bigger waves so far; 1, 2, and 3 (or ABC)

But what if the market opens lower tomorrow and starts to move lower in a 5 wave pattern that gets sluggish and has ending diagonal characteristics where waves 1 and 4 overlap in price range? This would be a bullish reversal pattern.

So thats how my mind thinks in this instance if the market would open lower tomorrow and keep heading down a bit. I'm looking for wave 5 bottoms and a potential bullish reversal pattern.
It would probably be more bearish overall if the market traced higher first tomorrow and then started to sell off after a more proper wave 4 peak. This would match up with a more traditional channeling pattern such as the one I showed in tonight's update:

Of course the market can always produce impulse extensions in its wave structure and throw your *expectations* off. However I don't think this is a good spot for that to happen since the subwaves do not suggest it.
If today's low holds tight, then your looking at an ABC 5-3-5 pattern from peak.

E-minis Hourly MACD and Stochs

The hourly MACD and stochs on the e-mini hourly both are near the "floor" as I show in this recent snapshot taken a few minutes ago. This is all hours of course.

Another wave move lower may likely result in these indicators developing positive divergence and often signals the bottom of a 5 wave move or the bottom of an ABC structure of some sort. Then the positive divergence on the MACD often results in a nice bullish bounce at the least. You can see the 3-4 times on this chart when that happened, an up move was not too far around the corner.

Of course if this is P3 already, you can start to throw that kind of thinking right out the window LOL!! But P3 has not yet reared its ugly head I suspect.

Elliott Wave Update ~ 15 June

The market has traced what appears to be wave 1, 2 and 3 down from 956 peak. Wave 4 should be in play and what is needed for the bears is another wave lower to complete the first 5 wave pattern of any significant decline lower. My 5 minute chart shows what this first 5 wave move might look like.
However, I haven't yet abandoned the last ABC to a P2 peak primary count. The "uncle" point for labeling a Minor B wave would be the about 914 SPX and that would have to show signs of a bullish reversal such as a falling wedge, ending diagonal or positive divergence in any 5th wave push lower.

The VIX shows a falling wedge pattern and an upper trendline has been obeyed for quite a while now. VIX shows the fear factor. It is on the cusp of the upper line. A clear break and hold over the line is bearish for the market.

My 60 minute chart also shows the SPX is at a key RSI support line. This support has yet to be broken the entire rally. Its just an interesting observation I am not sure how significant this support line is at this stage.

Total volume was not too high, at least on the SPX cash index. So sellers have yet to come out in droves. Just lack of dip buyers for now. But volume of course may pick up with a break of the VIX upper trendline.

I do not like to get "stuck" on counts and ride them into the ground. But 914 was always my "uncle" point for a B wave low of an ABC to P2 peak so no need to change that just yet although confidence is very low because the waves are not really supporting that count with a high degree of certainty. Thats why I am keeping a close eye on the bear wave 5 wave structures down. I am a permabear afterall.

As a side note the SPX gap that existed was not quite closed. Less than a point left.

Here is what I am thinking in my 2 basic counts:

1) If this is the first 5 wave pattern down in a big 5-3-5 zigzag, then your looking at the first 5 wave pattern to end either at 914 support or the 200DMA and a bounce that may retrace back up into the high 920's or more. Then another big 5 wave move down toward 878 support completing a 5-3-5 zig zag.

2.) This is NOT a significant decline and merely a "B" wave low settling in a final ABC move to P2 peak. This count would support the notion of end-of quarter window dressing and the final dip buyers buying these last dips. This B wave low realistically cannot go much lower than 914 SPX.

SPX Support Layers

Beginning of a significant decline? Futures point bearish. Here are the support layers that exist from 878. There exists support (which may quickly become resistance) at 935. The next support layer spans from the top of the gap at 923 - 927 or so.

After that breakout support at 914 and a little below that the 200DMA.

900-904 offers a zone as well. Ultimately 875 - 878 is the bedrock support for P2 at this stage.

At this point EWI's primary count that this was a 4th wave triangle (a distributive kind of triangle I suppose) and the 956 push was a 5th wave top is looking pretty good at this stage. Indeed if their count is correct, than the gap at 920-923 may be filled today or tomorrow. For if their count is correct then any decline today would be a 3rd wave down and Friday's goofy action was just a pause in the decline. I guess all of Friday's ABC structures were just that - correctives.

Ultimately though, I still am looking at 910 - 914 support as a key to the whole wave structure. Thats a key EW marker for now. If 910-914 maintains, then any decline might be considered an ABC pullback from 956. If 910-914 breaks lower, then you're looking at a potential significant decline and a signifcant impact to the overall wave structure with larger impulsing patterns down.

Sunday, June 14, 2009

Friday's Microsquiggles

UPDATE Monday 6:20 AM: Never mind this post. Its not a leading diagonal. Futures already made a new low.

EDIT 6pm: added some info and corrected paragraph spacing

I am using the e-minis for the microsquiggles because they give a bit more clarity perhaps on the situation.

Kenny shows a nice double three possibility for wave [ii]. The only thing about a double three is that it was a sharp zig zag down from 956 peak and double three's are supposed to be generally a sideways correction. I do see a triangle though in the same area as he shows.

I do a see another possibility as the whole day's move being a leading diagonal in the subwave (i) position of Minute [iii] of C. And as you can see it is definitely a 3-3-3-3-3- pattern and not a 5-3-5-3-5 pattern. The book (Elliott Wave Principle ) was undecided about this form back in 1978 and for good reason. They reported examples of both.

This intraday squiggle pattern may be a supportive evidence of a 3-3-3-3-3 pattern leading diagonal. Perhaps the market DOES trace both depending on the situation. I like to think of it like this: The market *thinks* it should be going down so it traces A-B-C corrective patterns to the upside. Well lo and behold the correctives keep ending in higher highs and lower lows and result in a 5 wave move (overall 3-3-3-3-3 subwaves). Who knows. I think both patterns are probably valid. The only "rule" I would imagine is that its either a pure 3-3-3-3-3 or a 5-3-5-3-5. This seems to be the 3-3-3-3-3 variety.

It could also be that the previous move (for instance a sharp move down or a slow ending) down prior to a leading diagonal will determine which type traces. That is just speculation on my part. Perhaps a very sharp prior down move results in a 3-3-3-3-3 type. Maybe a less bearish prior move allows a 5-3-5-3-5 to develop.

Of course the market needs to *confirm* that the trend is up with a continuing move up on Monday and a lower low cannot be made here. So this post may be all for naught, we'll find out soon enough.
The 3rd possibility is that this is a just a complex corrective wave 2 back up of some sort after a 956 peak. Which means 956 will not be breached and after this correction back up peaks, it continues down in some fashion to a lower low. But this would be an odd corrective wave 2 so that is a lower probability.

Friday, June 12, 2009

SPX Daily Candle Chart

Some TA here. But notice the "zigzaggyness" of the rise since 666...indicates that this bear rally is just that: a bear rally that will ultimately fail....
But short term (early next week) it does not look bad at all.

Charts have a lot of notes. Particularly look at the made a new high today. That is not bearish. Lots of budding "BUY" signals...

Monday should be a power move up day to fit the profile of a (iii) of [iii]. Waves say so. Charts do not disagree.

Kenny 158, Daneric 133

This can not stand! I'm talking about Google followers of course.

I met Kenny on the Yahoo SKF message board and he put out just awesome charts. He actually inspired me to charting a year ago and particularly Elliott Wave Theory. He started a superb website and has a daily market conversation of course that draws a lot of commenters. I of course have a day job and occasionally can squeak in a post or on a day off I might be active. But Kenny's intraday conversation is always lively; sometimes I lurk (when I have some free time).

His website inspired me to make my own website. He was pimping for Elliott Wave International (EWI) and now so am I (we are both hardcore members).

We often refer to each other on our charts and blog posts about wave stuff cause its a light hearted rivalry almost. Actually its more of a collaboration because we are always bouncing stuff off each other at least wave stuff. And we both like to rip Steven Hochberg (he does 3 updates a week for EWI) whenever we get the chance. (even though I always eagerly await Hochberg's updates every Mon - Wed - Fri) Kenny's TA skills and experience vastly outweigh mine but I have learned a heck of a lot from Kenny and am grateful. He has a zillion public charts and they are constructed in an excellent way.

But ironically as the "junior" member, I always had more Google followers and now I see he has been actively trolling for followers in his posts (specifically to beat me!) and he shot up some 30 members in a day!

This cannot stand of course now I truly do feel inferior so this post is my first troll for followers so I can make Kenny squirm about it again. At least I'd like to close the gap a bit!

So if you like my work and wish to stop in from time to time, become a Google follower. That'll keep Kenny working hard for our great benefit! (thanks Kenny)

Elliott Wave Update ~ 12 June

EDITED 730PM FRIDAY: I edited my commentary for clarification. Too many Cap't Morgons on a Friday heh
I told you it was an up day (LOL - 1 point!). Well actually the intraday waves is a mixed bag of zig zags and 1 impulse to the upside thrown in there along with a spikey end of day move. Today's intraday waves are a very tough read indeed. Its as if the market is not sure what it wants to do. However, it lokks more bullish than bearish.

The e-minis actually made a 5 wave up move, all during trading hours so that is a clue that this whole move up today is a leading diagonal in the subwave (i) postion of wave [iii]. That means more upside to come.

What does that mean? It means there is no more room for the bulls, retrace of wave [ii] is over and we go up Monday very nicely for the "meat" of a wave (iii) of [iii] move. Unless of course wave [ii] is some kind of sadistic complicated wave, I'd definitely say wave [ii] is over. I'd also say subwave (i) if [iii] is about over and it has to be a leading diagonal I suspect. So Monday *should* be a very bullish day if this is a true wave [iii] which is my primary count.

Prices recovered. Bears got squeezed a couple of times again. Bulls still hanging up here in the 940's. Higher lows the past week or so. If your a bear, you're hoping this whole past 7-9 days is a distribution pattern. The waves do not support that view.