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Wednesday, June 30, 2010

Elliott Wave Update ~ 30 June [Update 5PM]

[Update 5PM: The dollar's count is also playing well within its wave structure. We can guess that a B wave is playing out and will take the form of a flat or triangle of perhaps a combination.  But so far it surely counts well as a pause in the decline of the dollar that started at its peak.

Technically, note the possible BEAR FLAG forming and of course the H&S formation.

Originally I surmised that the dollar would make a C wave (2) price low in conjunction with a Minor 2 high in equities. Since we assume Minor 2 high is "in" the next logical place in the wave structure is that Minute [ii] of Minor 3 price high will correspond (nearly) with a Minor C of Intermediate (2) pullback on the dollar.

Incidentally, GOLD has a decent chance of having a good blowoff top during the C wave pullback of  the dollar. In fact I would be disappointed if it did not play that way.

So Gold's long run (for now) would be over on the far edge of the right shoulders forming in equities. Just a thought.  But we'll see how long term sentiment stacks up on Gold if it rises further from here. So far
sentiment is not yet back at a (long term) extreme. Perhaps a blowoff peak will put the final touches on that sentiment extreme.

Today couldn't have played out any better as far as the primary wave count. After yesterday's extreme downside internals indicated that a middle third of a likely Minute [i] of Minor 3 down had occurred, we surmised that all the final subwave fours and such needed to play out.

And today did not disappoint.  Working off extreme oversold on the hourly indicators for most of the day, renewed selling came in at the end after a truly uninspiring price action. 1040 support broke.

Here was yesterday's chart where I surmised a bump in a subwave iv and then more decline

And today's result
The SPX usually counts pretty much the same as the Wilshire, I use the Wilshire to help interpret form and orthodox endpoints.

[Here is an example from just the other day: When I surmised a sideways three day bearish triangle was in play I noticed that the proposed "c" wave price high (due to the rules of triangles) was on a differing price peak for the Wilshire versus the SPX.  It made me think, hey that looks a bit odd and although a triangle is on the SPX, the Wilshire is indicating perhaps not a triangle.  Well the hard wave down the came.  Was the Wilshire giving a subtle clue? Compare the 10 minute Wilshire versus the SPX 10 minute squiggle chart, you'll see the Wilshire (which is the entire market) decidely makes a nice subwave ii of (iii) where the SPX is more mushed. Anyways - that is some deep squiggle stuff but it had brought me some pause the other night]

SPX 10 Minute
Here is the SPX 10 minute:  The Fibonacci calculations for a wave (iii) expansion works nicely so far.  Extrapolating this subwave count outwards gives a Minute [i] low of near 1000-1010 if we get a "picture perfect" subwave count from here on out. It will of course decide for itself when it wants to bounce.

We do have an open gap down there below 1020.
Could we be in for a "waterfall" much deeper than 1000 prior to a significant counter bounce?  Am I shortchanging the wave degrees here and will it extend much further than this count calls for since we lost 1040 support?  We'll find out.  For now, we can only surmise we have a decent probability in both count and potential bounce points.


If yesterday's very strong downside opening was a middle of the third of Minute [i] of 3, then we look for the last subwaves to play out. This means any bounce today should be met by selling at certain points.

By EW rule, the price low of 1067.89 SPX where I have wave i marked cannot be breached. Realistically it shouldn't get that high as there should remain a blue box virgin wave area created by the middle of the thirds.

So the waves have room to bounce while keeping with the interpretation of wave iv or (iv) of [i]. Using a daily SPX chart the first resistance spans from 1050-1055 or so. Futures shows this area roughly by the blue horizontal line.

The bottom of the "flash crash" candle is also a logical stopping point of 1065.  We are extremely oversold on the hourly chart and the RSI is smashed. Higher than that and something else may be going on.
I'm also watching the dollar as a wave C down is anticipated soon.

Tuesday, June 29, 2010

Elliott Wave Update ~ 29 June [Update 8:45PM]

[Update 8:45PM: Not a lot of support in the blue box. NDX finally took some damage today technically. Broke under neckline support.]

[Update 4:45PM: Here is the larger picture.  You can see, that looking for Minute [i] of Minor 3 low is the best count for now.  If today's gap was the "middle third", or roughly the center of the structure down from 1131, then Minute [i] would project to around 1000 SPX.

We also have a channel developing and a lower channel line that eventually would like to be hit again perhaps and that resides lower than 1000.
Sometimes it appears at first glance we lose sight of the forest for the trees.  We cannot nor shouldn't in this market. Despite all the fancy charts, trying to get the little squiggles on a Minor wave 3 down near its top half is somewhat hazardous.  Just knowing we are likely in Minor 3  of Intermediate (1) should be good enough.

But backing up a bit, as we occasionally like to do, we have a Primary wave [3] down count in a cycle wave c of a Supercycle bear market.  This should take prices quite low. Robert Prechter argues DOW 400 or less when the Primary [5] down of c of the Great Bear is finally over.   I am not so bold but testing DOW 1000 support seems doable.  (And hey if we make it to 1000, whats another 60%?)

Fundamentally we have the "perfect" setup for this to happen: Our world financial system is arguably a Giant Ponzi.

Sentiment-wise, I have argued that in spite of massive negative sentiment, a Ponzi scheme, when recognized as such, will still result in price collapse. When people found out Madoff's fund was a Ponzi, sentiment turned 100% negative against it. And it naturally still collapsed.  Now the entire market is not a true Ponzi but if a good chunk of it (bonds, derivatives, etc.) is, then what would keep the stocks market up?

So using that logic, Primary [3] has a lot of work to do in cutting down prices.   And taking that logic further, we search for an Intermediate (1) of [3]. In theory, this Intermediate wave (1) should advance prices lower  than the previous wave one of next higher degree. This means (1) of [3] should take the market toward or below 666SPX prior to bottoming.

So you can see, extrapolating even further, we see that Minor 3 of Intermediate (1) has its work cut out for it. I suspect that Minor 3 will cut prices down quite a bit.  Perhaps equivalent to the 2008 crash period.

So again, taking that further along, the first Minute wave [i] of Minor 3 should again advance prices lower than the previous Minor 1.

And today those prices have advanced lower than 1040. So we are in a legitimate price range for a possible Minute [i] of Minor 3 of Intermediate (1) low.

Minute [ii] of 3 is likely to be the "oh shit, I ain't going down there" counter-rally wave.   Its likely to launch from below the 1040 support, perhaps well-below.  And its likely to be a quick, desperate rally.  The 19-23 Sep few hour rally of 2008 was a Minute [ii] of 3 of (3). Thats about the comparable thing I can think of.

(but again, this is just conjecture. The market will move the way it wants)

The downside internals today were of a "middle third" quality. At 11:1 down decliners and a 60:1 down volume ratio, its the second or third worst day of the year and the worst downside pressure by far since the 1131 high. In addition 1040 neckline has now been tested some 4 times. It already started to break down a bit today.  

Placing the FIB markers with the 50% Fib marker near the middle yields a possible Minute [i] low of near 1000 SPX. If today was the "third of a third" play out (middle of the Minute [i] structure), or iii of (iii) of [i] of 3, then all the rest of the final subwaves need to finish. Getting back to the larger count, 1000 SPX (or lower) would look nice for a Minute [i] low.  

So again, the market is not going to make it easy.  However, we know Minute [i] needs to advance prices under 1040. It likely has.  By how much more is what we'll find out.

The important thing is we are impulsing down in 5 and well rallying in 3 and the primary count has us in a likely Minor 3 of (1) of [3] down. 


E-minis broke down overnight.
And of course the dollar is on the move. Are we looking at the B wave peak on the dollar soon in a flat count?

Monday, June 28, 2010

Elliott Wave Update ~ 28 June [Update 8:05PM]

[Update 8:05PM: Here are some of the other charts I am watching. Most are like the market and sentiment in general at the moment: neutral at best and giving no clear indication of any big moves either up or down.

Not shown is the VIX. Its not screaming for one thing or another at the moment short term.

The dollar is the key. If this count is generally correct, how will it affect equity prices? I cannot square that a collapse in the dollar could be accompanied by an extended period of selling intensity in equities and such.  For now, I'll assume not. After all if the dollar falls hard in a C wave, then the Euro is likely rallying and that should be viewed as good for now yes?

Intermediate waves on the dollar are capable of being relatively short in time, but it doesn't mean they will be.
Cumulative advancers is more or less neutral for the moment.  Not really cluing us in on anything just yet. I threw some labels on there, but it might not pan out.
The only thing that strikes me about the BPSPX chart is that if you look at its RSI history, having a collapse in RSI from this level (thus falling prices) has not really happened.  It would actually be more normal for the RSI to advance further to perhaps the red line and green arrow.  So we'll see.
And last one for tonight the TED spread which has declined recently despite falling prices. Yes working off overbought. And yes is in a strong uptrend and could find support soon. If we see some upticks in this with rallying prices, then beware.  However for now, declining TED and declining equities its a positive divergence in favor of equities.

[Update 7:15PM: Here would be my top bearish count should we get either a thrust down tomorrow or an extended selling session. Market internals will matter.

What would support this down move in wave terms? Well in wave terms, as I have said before, the first subwave one of a wave three of any degree usually attempts to advance prices. So if we accept that Minor 1 low was 1040 SPX (or even 1042) then logically the market's first subwave Minute [i] would attempt to at least match that low or get it as close possible.   There is no solid rule on this, its just a sensible guideline, particularly in a nasty bear market.

In SPX terms, if (v) = (i) we are looking at gap up support at 1059ish for Minute [i] or even Minuette (i) of [i] of [iii].  Only time will reveal the wave degrees, for now we are trying to guess possible subwave bounces in a Minor 3!

Again, the market is at a small crossroads and it will resolve one way or another for the next day or so. We need a map for no matter what happens. That is the beauty of waves. If "X" happens, then we can expect "Y" and vice versa.  Its not the next move we are trying to nail so much, its the move after that which will be revealed more so.   The more the waves trace, the higher degree of count accuracy usually.

So yes, an up move means down is likely coming (wave iii) and a down move may mean up, wave [ii] is coming.  It depends on market internals at the time.  Its not always the next bump direction thats important we get right but how that bump may fit into the larger wave picture. And right now the next bump will go some ways toward developing the overall wave pattern.

So we need a map for the up bump and the down bumps possibilities. That is the nuance of wave counting. The problem is if you don't understand waves, then its a hopelessly impossible nuance sometimes.  Multiple wave counts such as I present tonight are perfectly clear to those who have experience at wave counting. To others, it may seem an impossible mess.

[Update 6:30PM: Well from the 1 minute waves, we see there are key markers that cannot be breached in order for certain counts to hold.

First, we have an inverted H&S in play with an upside target of 1097 on the SPX. Next, we can see we have no apparent 5 wave down impulses just yet since Friday's high, so that supports the primary count of further upside in more corrective waves up.  And if we look close enough where I have [1] marked at the noon high today, it looks like a 5 wave impulse up. Or we could have a bullish triangle that needs finishing tomorrow. Both those counts imply the same thing so its moot.

Three sideways consolidation days leaves one with the taste of a possible bearish continuation triangle in the works with an imminent breakdown under 1065 probably to test the 1055.69 - 1058.77 open SPX gap or even much lower which is considered a fairly large gap . The problem for the bears is what is a triangle doing here and now (if it is)?  

A triangle could be a wave (iv) of [i] would be one guess.  But we might have to get a bit liberal with the subwaves to make it work. But it wouldn't be that bad to do so.

[Conceivably a triangle here could be a wave (b) of [b] triangle which of course implies that the larger Minor 2 count is not even finished yet. Also a problem with the (b) of [b] interpretation triangle is that it is a very shallow retrace of (a). So that doesn't favor that count and its getting way ahead of things...but I do show it as an alt on the chart.]

This is my preference. As a bear, my medium term counts would work better if the market held its recent 1067 low and rather made a break to the upside first.  Then an eventual breakdown at upside resistance and a more severe selling wave (iii) of [i] down to come.

The primary count still prefers upside to challenge the 1090.93 - 1092.04 gap prior to the 1055-1058 gap. 

But we cannot order the market to do what we wish.   
So in effect, nothing was resolved today from Friday which is maximum frustration for both bulls and bears alike.  

Ironically if the market "thrusts" down in a gap down tomorrow to the open chart gap at 1055-1058 range, that may finally spark a bullish buying rebound spike particularly if there is a large SPX uncovered gap down. 

If the market decides to break upwards first, that could set the conditions for a wave (iii) or [iii] down once it hit its upside target (perhaps the 1092 gap)

I have to hold off on counting further until the market tips its hand. And it should soon enough. 


Trying to establish another uptrend.
The dollar is a key chart at the moment.  The U.S. wants to keep spending, and everyone else sees the writing on the wall and wants to reduce debts (so they say).  That would be bad for the dollar and a good reason for continued wave (2) pullback.  However will a weak dollar be as good for equities as it has been in the past?

Well one possible answer is that the dollar is again sitting at the 23.6% Fib and equities are clearly not at their recent 1131 high as the last time the dollar was at the Fib marker last week. 
I'm sure we'll see another massive flow of worldwide assets from one base to another in hope of finding a trustable short-term home.

Now Canada is being deemed a beacon of fiscal sanity for the world.
Umm ok.  You know when they toot that horn, the bottom is about to fall thats all I'm saying with that.

Good Luck.

Friday, June 25, 2010

Elliott Wave Update ~ 25 June

Things generally behaved as expected for a Minuette (ii) expanded flat count I presented last night.  And not much has changed from the intraday posts or reasoning.

The problem is the rally stalled just when you looked for the "fifth" wave up from today's low. It never materialized.  So we have mixed results.

So stepping back, we can see the market has retraced back down well over 61.8% from the 1131 top which is deep. (Even if the market rallied relentlessly using the alternate [b] of 2 count in some massive bullish [c] move up, [c] = [a] at 1156.)  So you can see how the alternate bullish count that Minor 2 has not topped is not inspiring at this stage.

The best count would be a more bearish one in that any potential bullish up move Monday is just the positive divergences finishing out in a Minuette (ii) price peak expanded flat move. Then the heart of a (iii) of [i] of 3 down occurs. We have an open gap lower under 1060 and we "expect" Minute [i] to finish lower than 1042.

Bottom line: If this is Minor 3 of (1) of P[3], this is no time in getting cute on subwave retraces.

Indeed, again, if this is Minor 3 of Intermediate (1) down, and we expect (1) to finish either near or lower than the 666 low, then we have a lot of price to cover. So from that perspective, things can certainly "flash crash" a bit here and there to get to the required price move lows.  

Again, Monday is a key cog in this wheel for the near term.
But overall, we might see a bullish move Monday, at least the beginning,  just based on the e-mini channel line backtest seems successful so far. Note the double hammers testing this upper channel line on this 15 Minute chart.

Confused? Yeah me too. I'm leaning bullish open Monday with a potential nasty reversal down....or not... That about sums it up. But to be fair,...the bigger picture?  700 SPX or bust baby by January 2011.
I'll have more charts tonight or on the weekend to try and tie the whole picture together.

The big wild card is perhaps the dollar for the near term. Its the thing that keeps me pondering the short term squiggles.

E-minis [Update 1:45AM]

[Update 1:45PM: Here is the squiggle count and top alternate. They both imply the same thing, just the targets would differ for each.]

[Update 1:35 PM: If this count below is correct, there are 2 ways of looking at things:  1) An expanded wave (ii) flat with a target around the gap down area at 1090.  2) An ending diagoanl wave v in which prices will rebound and trace beyond the starting point of the ED which is 1099. In that case we see above 1100 again and my blue virgin box area is the target range.

Based on the 1 minute charts below, I slightly favor around 1086-1090 and the gap area. In that case we should see a 5 wave move up to there in a c wave.

Now lets see what happens.]
Out of the channel

[Update 11:15PM: Still double positive divergence at the 30 minute level.  Some possible wedging going on. Also up volume ratio and advancers are still very decent today despite falling prices. So there is some up pressure going on at the moment to counter the down pressure.]

[Update 10:45PM:  An expanding triangle.]

[Update 10AM: You can feel the tug of war going on.  Here is the updated top count squiggle  I'm looking at:

Waves are getting compressed and some buying interest overnight. Challenging the upper channel line

Thursday, June 24, 2010

Elliott Wave Update ~ 24 June [Update 8:15PM]

[Update 8:15PM: Is the planet growing tired of Apple just yet? Fatigue setting in? I am tired of even charting the darn stock. If they stay pumped until earnings...sheesh its more than 3 weeks away I think.  At any rate, Crapple is reaching an inflection point as it strives to maintain support above $265-$270 which it has done well indeed. This is a bit reconfigured than the recent Apple chart I have shown. I adjusted the wave (4) triangle.

I moved the "A" just for visual sake.  Its valid down at the price spike low.  The adjustment of the triangle would make wave (5) longer in time which seems appropriate since its an Intermediate sized wave. This would imply Minor 4 of Intermediate (5) is tracing out, and a new high is yet to come.

The alternate is of course that the high is "in".  We'll know soon enough. If it fails to maintain upper support shelves.

[Update 7:30PM: One possible theme of corrective up waves in P[3] is that any retrace waves may be on the "weaker" side of things.

Today's early low would have made a perfect spot for a Minuette (i). This squiggle count imagines that yes, it was the (i) low and perhaps an expanded flat is playing out for Minuette (ii) with a target area of only the 1092 gap down created today (not 1100 or the blue virgin box area).   But c waves of flats are supposed to be 5 waves. We seen that (we think) on the recent Minor 2 peak at 1131, five waves up from the 1042 low.

This c wave structure would fall short of 50% retrace which if in a Minor wave 3, is certainly realistic as the downward pull on stocks may limit any retrace moves. Just speculation here.

Anyways, just a possibility as the last down move in the afternoon is looking a bit like a "three". The "a" was certainly a three. So we could have a 3-3-5 expanded flat going on for Minuette (ii). This of course depends on 1065 holding for any morning bearish move.

Primary and Alternate counts have swapped.
The [b] wave is now firmly a more remote alternate as the new low today confirmed a larger overall 5 wave move from 1131 peak. In fact, the early low today looked like a perfect spot to form a wave (i) of [i] of 3 low. The market then started to rally in what would be an expected wave (ii) that would retrace a Fibonacci portion of the entire move down from 1131 peak.

But it failed and reversed early and made a new low in the afternoon. But even so, it still fits into a 5 wave pattern, at the least. So the market is clearly now impulsing down in 5 waves and every counter rally is a craggly 3 waves. That is one strong reason to suspect 1131 is Minor 2 peak.

I suspect the market failed to rally today because it simply required lower prices to launch a counter rally from. No one yet interested and technicals were not screaming "buy me". 1065-1072 is more solid support that should be fought over a bit harder then the higher price levels.  1072 is a particular price axis that is a key axis for the market going back into early Fall of 2009.

Trying to judge the correct wave degrees
As far as wave degrees and the medium term picture, I am looking for a Minute-sized wave to move lower than the 1040 low as I suspect all wave one subwaves will attempt to lower prices than the previous wave one of next higher degree. It is a bias I have and until it proves grossly wrong, I see no need to shortchange things. After all, Intermediate (1) of P[3], in theory, has a lot of ground to cover.  So there is no need to scrimp on the waves just yet.

So how this Minute-sized wave [i] achieves this in the squiggles could be tricky to count.

Have we said goodbye 1100?
Therefore the 60 point move down from 1131 would probably count best as a Minuette (i) of Minute [i] of Minor 3 down. But this assumes there will be a rebound wave (ii).  Trying to predict the smaller-degree rebound waves can be dangerous in a Minor 3. However if there ever was a spot to launch a rebound rally in a last-ditch attempt to touch 1100 area again, the market is likely near that spot with some decent support spanning 1065-1072.

Remember, if P[3] is the larger count, and the market is working on building the far right shoulder of a much larger right shoulder of a 10 year head and shoulder pattern, sooner or later its going to say "goodbye" to these higher levels.

So is there one more effort to climb just above 1100 left in it? We have a perfect "blue box" virgin wave area that marks a potential wave (ii) of [i] rebound.  If it cannot do it now, it may never again. The 1100 area is slipping away. Minor 3's target is certainly lower than 1000 SPX and perhaps even much lower than 900 SPX.

Market Internals
Internal down volume ratio and decliners was slightly less today than on Tuesday (where we have wave iii marked) so that also supports a wave v of (i) low.

30 Minute SPX Chart
You can see a pretty good positive divergence on the 30 minute chart of the SPX with the RSI low on wave iii down.  So this supports the idea of a wave (ii) rebound to the blue box area for one last hurrah above 1100. However the MACD is kind of weak in backing up this positive divergence.  Its certainly nothing to bet the farm on. However the ROC and Ult Osc also have positive divergence.

So the bottom line is if the 1065-1072 support area holds firm, then we can expect some kind of retrace wave (ii) rebound of the entire decline from 1131.  The blue box area would be a possible target.

The flip-side is that Minor 3 decides to crush this divergence somewhat and roll over it and impulse down some more.
Unfortunately until we get some kind of clear larger-sized corrective up (other than intra-day bumps), or a more complete set of downside impulsing, we are largely feeling our way along here.  It will start to become clearer as the days pass.  But Minor 2 peak at 1131 is looking pretty decent at this juncture.


There is a new low in the e-minis overnight. Its channeling and stair-stepping lower. There is a smidgen of double positive divergence on the MACD at this moment anyways. Good luck!

Wednesday, June 23, 2010

Elliott Wave Update ~ 23 June

Price action is uninspiring.  The Minute [b] count is on very shaky ground.  Usually a B wave is considered a consolidation-type wave but this has been more of a quick impulsive selloff....almost...because however, using an hourly or a 10 minute chart, it still looks like a "three" down as of today on the cash index at least.  A quick lower low tomorrow under today's price low would make the whole formation count nicer as a 5 wave structure down.

If Minor 2 high is 1131, then Minute [i] down of Minor 3, in theory, should try and take out the Minor 1 price low before bottoming.  So hence the ALT count wave degrees is set based upon this principle.
Again, it may count  best as a "three" for now, however a new low under today's price low will make this a verified 5 wave impulse down.
The daily chart shows the RSI is ready to fall out of a possible upward channel. However, overall, volume is light and it closed above the 20DMA for today.
So the market is on the cusp here.


No new low yet overnight.  Fed day today. You can clearly see the triangle in the middle of the down structure  so far which, for the moment at least, makes the whole thing a "three" or corrective.

Tuesday, June 22, 2010

Elliott Wave Update ~ 22 June

The market achieved a 38% retrace.  [b] waves can retrace deeper of course but not too deeply (its not supposed to be a wave two) and it should hold in general some kind of upper support layer and not a support of last resort.  That quality supports probably lies in the 1086-1090 area. The critical support is probably 1065-1072. The 20DMA lies around 1089. Gap support at 1089 also.

Again we have to use EW logic to interpret where we may be:

1. Since the count up from 1042 probably counts best as a 5 wave move, we should either suspect it is finished at the 1131 high in a Minor 2 peak, or we will get another 5 waves to a higher peak to form a 5-3-5- zigzag count for Minor 2.

One rule of thumb I find is that if everyone has that count (particularly EWI), it likely won't pan out. So I am cutting against the grain a bit here.

2. The top alternate, indeed many have as a primary count, is that this 5 wave move from 1042 to 1131 could be a [c] wave of Minor 2 up in the flat/expanded flat count.

3. To me, the count depends largely on my dollar count. If the dollar makes a C wave lower, I strongly suspect that equities will rally to a higher high above 1131.

So hence my primary count is that this is a [b] wave pullback and that eventually the dollar will fall harder and the markets will rally higher pretty much in unison.  If my primary count is wrong (which implies the dollar primary count is likely wrong), then the market will let us know soon enough.

The dollar is moving into position for putting in its own B wave perhaps.  Then a C wave should take it back toward a decent price retrace for Intermediate (2). There are other possibilities going on here of course. But until it proves otherwise, I see no reason to change things.
You can definitely see the [b] wave bump on a daily candle chart if thats what it turns out to be.
I reconfigured the 10 minute up count to a more simplified view. I could have kept the extended wave (v) count but for simplicity sake here is an easier view.

The move down from 1131 peak looks like a zigzag "three" at the moment. Perhaps we will see more waves forming a clearer structure.  At any rate, for this to be a [b] wave count, support is going to have to hold somewhere soon.
The advancer chart has now the look of a [b] pullback that I was hoping/expecting for the past many days. Well it finally arrived now lets see what happens going forward.
I never like to guess what FOMC meetings can produce but if anyone can get the dollar into a freefall and equities into a move higher its some well-timed BS put out by Benny and Co.

Its almost as if the wave pattern is predicting some bullshit that will move the dollar in a bearish mode and the markets in a bullish mode come the end of the FOMC.  Its coming to a key juncture here in the wave structure.  Not that it matters in the long run even if it manages a new market recovery above 1131, primary count says it'll turn down anyways.


Quick mechanical review, using the Wilshire 5000 as reference,  it managed 4 straight squeaker closes above the 19:1 decliner candle down day.   Yesterday it attempted to break out of this area by shooting up hard at the open and then fall back and using this area as support.

I figured there was a decent chance that it would be successful and that we had a Minute [c] of 2 "kickoff". But at the end of day the effort  was unsuccessful because the market closed under the top of the 19:1 candle yesterday.  Yet it was not a complete and utter failure...yet.  We suppose the market can consolidate some more in a [b] wave and hold some kind of decent support not too far under the 1100 area and perhaps will it try again in a [c] wave proper.

The e-minis structure supports that theme for now. Having been in a channel since its recent low, Its probably now out of the channel.  It would yet again consolidate in a [b] wave I would think before attempting another breakout higher.

So thats the top view for now. However, if we get overwhelming sellers back in the market, lose some key support areas (green lines on the e-minis)  then something more sinister is happening and there is an excellent chance Minor 2 had quietly completed its retrace mission.

Good Luck.

Monday, June 21, 2010

Elliott Wave Update ~ 21 June [Update 6:37PM]

[Update 6:37PM: Well how about we check our other indicators and charts to help align us with the overall Minor 2 up count?  After looking over the charts, one can suppose that today was the top of Minute [a] of 2. and not 2 itself. At the least, the charts have met minimum target areas, but would look better if they all hit deeper. Here they are:

[Update: the TED spread also fell today.]

The dollar: This is a key chart. Wave "A" of (2) likely bottomed as I shown earlier on my post today

Again, B wave strength in the dollar could translate into further Minute [b] of 2 weakness in equities. I thought it might decouple a bit today but alas, it didn't really too much in the end. Green dollar, red markets.
Advancers chart really didn't take a hit much at all. It would still look better for a bit of a further down and then the [c] to peak.
I somehow missed the big gap up on the VIX chart, and now I suppose the market wishes to challenge that to  close it before Minor 2 is over. But before it is challenged, we could get some fear again in a VIX move up.
CPC moved into my target box but it could bounce around here and move lower eventually.
BPSPX has solidly retraced yet it hasn't yet been a 38% retrace. So again, even though today strengthened on this chart, ultimately more upside would look ideal.
So all in all, each indicator has reached expected minimums just as the market has reached expected 50% minimum. Yet, ideally each of these charts would look better if they moved a bit more. So that supports today as an SPX [a] wave peak of Minor 2.

[Original post]
The reversal nature of today's move could indicate Minor wave 2 is over. It did after all manage to obtain a solid 50%+ retrace on the SPX and Wilshire and actually higher on the DJIA.  Anything extra from here on out is bonus.

However, we don't yet have a solid 5 wave pattern down and have not yet closed under 1089 to confirm a more bearish reversal.   So rather then chart the squiggles, lets suppose that the 1131 peak was the top of Minute [a].

Another possible count is (i) of [c] of 2. But in this case, it will have to reverse hard up tomorrow and 1105 cannot be breached even on an intra-day basis.

A close under 1089 gap would be bad for any bullish count up. So one could suppose that if this is Minute [b] pullback, then 1089 gap should not be closed under as that would be a bearish reversal of the follow-through day.

The hourly chart's technicals support more of a down move ultimately from here. We have significant negative divergence at today's high and a solid reversal that could translate into further technical weakness on this chart as a minimum.
As far as the daily is concerned, we don't yet have an "[a][b][c]" move that shows up well on the daily chart. It doesn't have to of course , but something to consider.

Sunday, June 20, 2010

E-minis (Sunday Night Edition) [Update 2:51PM]

[Update 3:04PM: Well never mind equities, we have been nailing that dollar chart huh?  Definitely some B? wave upside today it appears. That the market managed to stay somewhat sideways despite the dollar strength is notable.]

[Update 2:51PM: This would be the count of the chart I posted just underneath. I cleaned it up so you can it it.  Its a classic expanded flat and triangle combination separated by an (x) wave.  Anyways, the clear thing is that "e" of (y) of [b] cannot be breached in order for this count to be correct overall.

[Update 2:23PM: Here is a near term squiggle count on the SPX and the way I view things. I actually gave it a slightly differing count than the triangle the e-minis shows. All the alternates you see are a cover my ass projection cause its a bit hairy as Minor 2 has achieved a solid 50% retrace so far. Any further gains is just extra gravy.

(By the way the count I show below would be a combination for Minute [b] - expanded flat for (w), zigzag (x) wave, then a triangle (y) wave.)

But as long as 1115 holds, then the market's primary count is higher still in a wave (iii) of [c] of 2.

This chart does show near term support levels and what they mean:

1. 1115 breakout support. A close under this probably means an [a] wave of Minor 2 has peaked.
2. 1105 support. A close under this definitely indicates a [b] of 2 wave is in play or worse, Minor 2 is finished.
3. 1089 gap support.  A close under this is technically bearish. This would indicate a reversal of the "follow through" day. In that case it would be an excellent chance that Minor 2 had peaked.

[Update 8:24AM: The euro would be in a similar count to the dollar, just in the opposite direction.]

[Update 7:35AM: The dollar count has that a zigzag back to the Fib 23.6% has occurred.  Now an X wave back up partial retrace, should occur.  After that, likely another zigzag down to achieve a better price retracement of the entire rise up from November. (The Stockcharts chart shows A-B- C and not WXY - same difference you get the picture.)

[Update 7AM: The contrarian in me suggests that Canada's property bubble on the verge of popping.

Be very afraid when you see these kinds of statements:

"model economy" (yet debt is back to record levels)
"Our banks are better managed and we have better regulation"
"There was no mortgage meltdown or subprime crisis"

And here is the kicker:
"In Canada's concentrated banking system, five major banks dominate the market and regulators know each of the top bank executives personally."

Yes regulators getting cozy with top bank executives. Nope, no problem there! In fact its a design feature they are proud of!

[Update 6:45AM: Has there been at any other time where there was a "sure thing" in trading? I would think that most everyone and their little brother expects the Chinese yuan to gain in strength versus King Dollar.

Now initially that probably does happen a bit.  But as Mish Shedlock has asked, what if the yuan crashes against the dollar instead?

The key thing is that every fool on the planet knows the yuan will gain a lot against the dollar and how much is up to its government. But what does the market think in the longer run?  I suggest it won't perform as  Timmy G wants it to.  When everyone is looking in one know the drill.

[Update 6:23AM: I know its early, but if this is a [c] wave of 2, then it should have some kind of relationship with its wave [a] and in time (multi-day) to achieve the "right look". I reconfigured the triangle a bit which allows a wave (ii) of [c] deeper retrace but you get the picture.

For instance a calculation of [c] = [a] probably puts this in the ballpark of 1167-1169.  If [c] = .618 x [a] your looking in the ballpark of mid -1140's and there is resistance there.]

[Update 5:37 AM:  Backtest of the upper triangle line successful.  5 more waves up.  The best count still has this as a "kickoff" for Minute [c] of Minor 2.]

[Update 9:38PM: Could be a backtest of the upper triangle line.  It just reminds you what a stupid market this is.
The only real wildcard in the whole thing is that the $ looks like an ED wedge. Maybe the end of A of (2).  EDIT: Too many random thoughts.
Tonight's bullish up move is likely Minute [c] of Minor 2 "kickoff" event.  The [c] wave would consist of a 5 wave Minuette (pink labels) structure to Minor 2 peak.

Top alternate is that its Minute [a] of Minor 2 peak.

Good Luck! Going to sleep.

The primary wave count has the indexes completing Minor wave 1 down on 8 June in the form of an overlapping 5-3-5-3-5 leading diagonal count.  I postulate the SPX and Wilshire ended very slightly truncated (did not take out the wave [iii] of 1 low). The DJIA, Trans, NASDAQ, and RUT did not end truncated.

After leading diagonals complete, they can retrace in the opposite direction sometimes to 78.6% Fibonacci. Truncations indicate exhaustion and can also support a violent move in the opposite direction. So the leading diagonal coupled with truncation on the SPX and Wilshire (which is the entire market) supports a violent, potentially deep retrace Minor 2. This we must be prepared for as it is what the Elliott theory suggests strongly can happen.

Minor 2 up is likely to take the form of a 5-3-5 [a][b][c] zigzag as wave 2's typically take this form.  Wave 2's also typically retrace more than 38%.  From 45-72% can be considered "normal" with 50-62% quite typical.  At the end of Friday, the Wilshire had reached a maximum retrace of only 44.9% so far.  So we are beginning to hit minimum expected retrace targets but we suppose 62% or higher can certainly be hit.

I have also been suggesting, even before the market closed over it,  that if the 19:1 down candle produced on 20 May could be held as support, then the market is capable indeed of higher retraces. I showed on Friday that this candle has now been closed over for 4 straight days. The market also thought it was important as I suggested.

Additionally, the market produced a breadth thrust event that I blogged about here which led me to believe that Minor wave 2 would indeed likely be your typically deep retrace.

Since the Minor 1 low, efforts have been made to identify the [a][b][c] retrace structure. Specifically the Minute [a] top and the Minute [b] consolidation. As far as the [a] wave top we have several price points that can be candidates.  

As far as the Minute [b] wave consolidation wave, I have supposed the last few days the [b] wave was tracing but we were not sure if it was finished or not.  As of the end of Friday, we felt there were numerous possibilities (and I was thinking a quick burst down) and unfortunately only the market could let us know the final outcome. I feel it has let us know tonight. Tonight should be Minute [c] of Minor 2 kickoff. 

That brings us to Sunday's e-mini session in which a huge thrust up has occurred.  Any thrust move always makes me think of triangles.  And so it is, I now have the primary count as Minute [b] tracing a running-correction triangle.  This triangle actually shows very well on the e-minis. It includes the (d) wave as the one required complex leg. Additionally the (e) wave also traced its own mini-triangle which e waves seem to be doing a lot of since the 2009 lows. (again this doesn't translate well to the cash index as the last red candle of the (e) occurred in A/H's on the e-minis)
As far as the cash index, the triangle is less pronounced but when using the Wilshire as I do here, here is the basic gist of the proposed [b] wave running triangle.
If this interpretation is correct, what does this mean for the market going forward? 

1. It means that tomorrow morning, if futures stay elevated, the opening will "kickoff" wave [c]. Specifically we would look for a 5 wave structure of Minuette (pink) size to mark the price high of Minor 2 retrace up. I 

2. It means that Minute [b] wave a running triangle, high-level support consolidation. We have seen this recently at Minor size on the way up to P2 peak at 1219. The Minor B in that instance was a running triangle. Also note that the breakout retraced deeply in a Minute [ii] yet held from going under [e].

2A. The same holds true here.  In order for the market to clear above 1112-1115 resistance, it will likely have to thrust way up above that price in a wave (i) of [c] move. That way any wave (ii) retrace back (perhaps Tuesday?) will hold above 1114. 

3. If tomorrow is a kickoff move for wave (i) of [c] of 2, then wave counting rules apply. This means that Friday's "(e)" wave price low (1114.8 on the SPX) should stand firm on any attempt to close the gap up produced by the kickoff move.  So we suppose that any gap up will hold or offer support in some form or fashion.

4. Minute [c] should have some Fib relationship to Minute [a] in price and/or time.  So Minute [c] usually would take at minimum usually a few days at least to a week or more.   Only the market can decide and time is usually a function of sentiment. If sentiment "cures" and goes bullish in only a few days, then that could be enough. If sentiment remains too skeptical, the [c] wave will persist until the skepticism shakes out.

(So it will be interesting to see comments - these too are clues)

Ok, so what if we get our kickoff wave and the market reverses and closes either red or in a bearish manner? Well, we'd have to consider that some sort of bearish reversal.

1. The top alternate in the case of a bearish reversal in which my proposed (e) wave price point (1114.8 on the SPX) does not hold, then we could be looking at an [a] of Minor 2 wave high and then the [b] wave would occur. In this instance [b] would retrace a portion of the entire up move from 1042, and hold support.

2. The second alternate is that EWI's primary upward flat count would be playing out and Minor 2 would be complete altogether. In this case its bad for the market and Minor 3 down is in play.