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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. 

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