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Tuesday, May 4, 2010

Elliott Wave Update ~ 4 May [Update 9:55PM]

[Update 9:55PM: $RMZ. Looks like a classic bearish wedge to me. If this is an ED count, then prices should collapse back to the start of the ED pattern at least which would be the B wave. So SRS should fly in this case. And the continued heavy volume on SRS is ongoing. Caution: Due diligence of course.
A quick snapshot of the volume on SRS. All the green volume candles are noticeably bigger than the red volume candles of the past week or so.]
[Update 9:30PM: I haven't mentioned much about the Greek thing etc. There is not much to add as Mish, Karl D and the Zero Hedge team are all over every angle for the past month(s). I am fully following every last post and a lot of the comments as it is a true comedy show what the ECB is doing.

I will say this though: As I mentioned the other night, its becoming painfully apparent that entire countries are now kiting checks to each other. The common man can understand this concept. Derivatives and swaps?  Abstract numbers like $100B (never mind a trillion)? Nope, not so much. But writing a check on an account that is empty and writing more to keep covering the last is something that most adults over 40 understand fully.

How else can you explain Spain and Ireland and Portugal helping to bail out Greece when they are the next in line at the bank window? So the only thing I can really add to the conversation is that the Ponzi schemes of the World's rotten financial system are slowly becoming apparent to the common man and that is not good.

I have postulated before that Primary Wave 3 is likely to be known as the Ponzi wave.  

To recap:
Once the majority is made to be aware of a Ponzi, it collapses rather rapidly despite overwhelmingly negative sentiment toward it! There are no upside surprises in a Ponzi scheme.  

I would also add the theorem : When trust and credibility are broken, financial systems can suffer greatly and even fail completely.  There is no doubt that the ECB suffers a credibility problem.

The mixture of these two potent elements can help spur a P3 wave to great depths.

Throw in all the other elements like outright fraud, a consumer in a generational retreat, economies that are in deflation mode, derivative time bombs and just huge mountains of unsustainable sovereign debt and debt promises, the entire USA's pension system and municipal, state, and Federal "investments"  that are on the same side of the bet and you have a toxic mix. I could add a zillion other things. Social mood is not getting better. Just look at current U.S. politics for a reflection on how toxic it is getting. 

The market of course will probe these potential weaknesses and many more.  The market cannot be "jawboned" by politicians into doing what they want it to do. The more jawboning, the more the market will probe!  

The whole thing is funny and sad and scary all at the same time. I have no problem sticking with a projection for new market lows under 666 in due time.  Even that 666 number is just surreal. The Earth is, after all, the Devil's playground.

[Update 8:20PM: This post  shows the theory that this P2 rise has popped over in a false breakout of the old Supercycle upper channel line from 1932 low in an effort to "regain good old times" like its 1999!...  Today the DJIA dipped its toe back under the channel.  I theorize before this bear market is over, at the least it will bust down through the lower channel.]
[Update 5:17PM: AMZN got crushed a bit today.  It found support at around $128.  If that breaks, the $115 - 120 area seems next. Ultimately the big prize is closing the mega-gap up at $90-110.]

[Update 4:48PM: Updated Wilshire's chart count below. Did some Fib calculations and the price low today was exactly 1.613 times wave i of (iii), very nearly a perfect Fibonacci 1.618.

Here is presented a most excellent down count however there is a small problem: The pattern needs to finish out with more downside!  Hey this wasn't supposed to be easy!

So far what we have off the top, is a big ABC down pattern. Invariably most 5 wave moves down look like an ABC-only when taken as a "snapshot" at some sub stage of the pattern prior to its completion. .

My count is of course a bearish count. Today's drop then sideways action could be a small subwave iv of (iii) which implies lower lows are coming likely tomorrow. We have limits for this count.  The horizontal line under the price low of i of (iii) must not be broken or else some other count is in work.

(NOTE: As far as wave degrees go, perhaps I have them all set at one degree to small. For now we'll just leave them as they are)

For the bulls, the bullish count would be an ABC off the highs and likely an X wave is coming back up perhaps to challenge today's gap down.

So even though today's down move aligned with my bearish count, we do not yet have a decent 5 wave larger Minuette degree (pink) pattern lower. We need at least new lows tomorrow to help confirm.
The e-minis supports the idea of some kind of wave iv expanding triangle. We'll see how it plays overnight if the bulls want to keep buying aggressively the dips or not...
Technically, the market's internals agrees with the primary count of the heart of a wave (iii) lower. We have the most broadly down breadth so far off the high and indeed in a few months. So downside breadth expanded today which supports a wave (iii) count.

Notice candle 23's gap was closed at the low today but candle 23 was not closed under.  If candle 23 is closed under, the market could very well head back toward candle 22, a candle that has the best up/down volume ratio of the move up from the February low.  A close under candle 23 would coincide with a close under the 50DMA which is where the market found some support today.

Daily candle is long and red for the most part.
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