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Saturday, July 31, 2010

Weekend Charts and Stuff

Although we can imagine a count that will finish out this market within a week or so, I must admit I really like the bearish side of things. We have the primary count of an ending diagonal wedge because we'll give the bulls the benefit of the doubt and the potential pattern the benefit of the doubt.

(If a potential wedge is staring you in the face, we have to accept thats what the market intends to complete)

There is not much point in making a lot of words, as we'll know soon enough come Monday what the market may have up its sleeve.  Beginning of the month after an 8% run-up should mean some sector rotation/re-balancing to come at the least.  That can work both ways for both bulls and bears so again, we'll just have to see how it shakes out.

But we do have pesky resistance and we do have an eye on that 1070-1072 gap area in a test as support. And we do have a valid 5 wave structure down now and a seemingly a-b-c counterbounce.  So going with what we got, I like the bears' chances.

The top bear count (Minor 2 has topped) takes all this into account perhaps. Question is do I have the wave degrees correct? I suspect its close enough for now: We are looking for Minute [i] of Minor 3 down and a decent target range is from 1000-1030 for starters. Remember the first wave one subwave of a higher degree wave three attempts to advance prices (in this case lower) than they already have been.  So if 1040 is an orthodox Minor 1 low we should at least expect 1030. If 1010 is the orthodox than we should expect 1000. Hence, 1000-1030 is a minimum Minute [i] target off  the top of my head. Thats a minimum range remember.

Friday, July 30, 2010

Elliott Wave Update ~ 30 July [Update 9:32PM]

[Update 9:32PM: My email has changed slightly. New provider.  Its posted in the "About Me" at the bottom left.  New one is with Verizon. My old Comcast account will soon be gone so use my new one thanks!

[Update 7:50PM: How do you square this circle if your a bull calling for 1250 or whatever?  Here is the DJIA since November 2009.  You can see 3 divergences on different time scales with price and volume. This shows weakness in my opinion, not strength.  P2 did not diverge on the way up until at these points that I show here.

Here is some simple logic: If the "correction" was over, you'd think the price and volume trend would stop diverging and turn bullish again, particularly if you have a wave three of primary degree count going on or even new squeaker highs above 1219 SPX cause its gonna take some doing to chew through those big bad bear candles that produced such horrid downside market internals.

Basically we have now more volume on the sell side and not buy side consistently for the past 6 months running. That is not a bullish development in any EW book that I know of or even any technical analysis interpretation that I know of.]

[Update 4:50PM: The Wilshire weekly candle pattern and moving averages are bear friendly this week.]
Key overlap in the indexes forces us to switch to the Minor 2 expanded flat count with Ending Diagonal [c] wave as the primary count. Price action suggests that this market wants another crack at a new recovery high above 1120 SPX.  So we have a count for it of course.

And an ED means we would look for an a-b-c "pushing" move up toward the trendline in either overshoot or undershoot.
A close alternate is that the market has seen its Minor 2 high and today was just a delay to the inevitable downside to come next week.  We have a squiggle count for that too. Its a bit shoehorned but hey I am an equal-opportunity waver.
The CPC finally made a new 10- day average low. So we can say the 10 day has yet to turn up which sometimes turns up just prior to a significant market high.
 I consistently said for weeks that Minor wave 3 down in equities could not get the party started until the dollar (and Euro) have corrected in their Intermediate (2)'s.  I was proven very much correct. The traitorous dollar even made yet another squeaker low today after a promising morning.  Its settled upon good support so its trying to form a base. But again, no dollar, no Minor 3 down.

Here would be the Minor 2 expanded flat count.  We have to be flexible with the possible Minor 2 counts. I may not like this count, but if it works thats all I care about.
As evidenced by the 10 day CPC, there is still a lot of conviction to the upside.  It can go lower of course and we await to see what the market wants to do next week.

E-minis [Update 2:37PM]

[Update 2:37PM: Probably my top bearish count of course if it follows though to the [C] target area.]

No new low yet overnight. Four hour candles trying to hold the line.

AAII sentiment survey strengthened considerably. Fresh data today:

And here is that data in chart form.  Long term chart courtesy   At least its not bearish which means we are ripe for decline. The amount of correction seems appropriate for a Minor 2 and it is one of the things I have been patiently awaiting for.

Dollar looks like a double bottom and possibly beginning an impulse. I think indeed, screw GDP, Minor 3 may be on.

Thursday, July 29, 2010

Elliott Wave Update ~ 29 July [Update 9:53PM]

[Update 9:53PM: Being the good bear that I am, I did my best to come up with a wave count that is bearish and I used the Wilshire for form.  Its one reason I struggled with calling this market "over".  I just had a hard time shoehorning something to a bearish count that makes sense and "looks right" (although the price action has certainly been bearish the last 2 days both with big gap ups that both quickly closed.).  So yes, its goofy and there were so many problems all over the thing that I couldn't do any better and that included a series of 1-2's although perhaps thats the best option.

At least it channels.

My best bearish squiggle count: Hey I was trying to obey the rules dagnabbit!

[Update 7:38PM: The FTSE 100 and GDOW I have as expanded wave 2 flats.  The target areas are somewhere at least in the blue boxes. That is my guideline on wave 2's is that they will retrace into this "virgin space" above the previous subwave four peak.  Such is the nature of wave two's.

So this is a test for that blue box guideline.  I don't know if the blue box thing will work or not in this instance - the American indexes have quite a different look going on with its waves and the amount of overlap they have. Additionally the FTSE has that black candle at the virgin wave space which is most unusual.

Now if you can imagine a move to the blue box area will happen, surely the American markets will likely be in sync with more upside also.

[Update 7 PM: First, never mind what the overall Minor 1-2 count may or may not be. Both the Minor 2 expanded flat and the Minor 2 zigzag count imply the same thing: Minuete (v) is starting up (if the market makes new recovery highs above the recent highs) so its a moot point at this stage and in the end both could be considered valid counts. We'll sort it out in the end.

Back to the GDP report tomorrow:  Here is some propaganda for you - but it does contain the basic facts of what they reported and what "economists" expect:

No matter which way it goes, I think we can all feel something is brewing.

In the end, like some implied in comments, it won't matter if we get a new recovery high, that wave (v) to 1122, 1132 or 1140 or the market gets a wake up call tomorrow. Minor 3 down is the next wave to play and soon. All we are doing is tweaking the final model here.

The dollar hit 50%. Euro barely has hit its 38.2 Fib.
The only major index that can be said to have a good 5 wave structure down from a peak is the DJIA.  Can we count today as a 5 point truncation event for the SPX and such? Well I don't think so. Truncation suggests extreme weakness and that is hard to argue when we had such a vigorous rebound and the day ended with more stocks up then down despite the red day overall. The Wilshire was so far from its recent high today that truncation cannot be counted in my estimation.

But the DJIA new recovery high today diverged with the other indexes which showed some short term weakness that was pounced upon.  But support held and buying ensued. 1107 was actually regained.

Lets face it, tomorrow's preliminary GDP report is much anticipated.  From a 5.8% qtr to a 2.7% qtr, the market wants to know what the trend is for last qtr.  Will the number be correct or true? Probably not, at least not the preliminary it'll be likely beefed up.  Consumer Metrics has their take on things. Page through and read their July 21st commentary.

Consumer Metrics says we actually contracted since early January which I tend to believe.

Yet if  BEA announces 3.1% growth (they forecast 3%) what will the market do? I can only go by the waves. So far I only see overlapping down (except DJIA) which by nature is corrective so thats what I got to go by for now. But you know the game. If the algo's get a hold of a news item and if there are no sellers, they can wreak havoc on the bears.

I hesitate to change counts but in this case it wouldn't be a big deal. It would be a flip-flop between Minor 2 being a straight [a][b][c] zigzag (since March lows) or the more complex Minor 2 expanded flat (which implies that this rise since the July lows is a 5 wave move not a zigzag.

So again,  the primary count is that a new high will occur on the SPX.  Why? One reason is because we don't yet have a 5 wave structure down or even a good "half" structure to suggest otherwise.
This would be the expanded flat Minor 2 count with a [c] wave ending diagonal triangle. Now I could still claim it was a ZZ and call it a day, but if the market heads back toward that trendline toward 2 would it honestly look like one?
In a nutshell:  The overlapping [c] wave would fit perfectly here for the final "push" of a market that is in way over its head. That overlapping 5 wave structure would suggest an ending diagonal pattern. ED's also suggest a subsequent price collapse to beneath from where they started (1010 SPX) and this would be a perfect kickoff for Minor 3.

(also if the SPX went from 1092 to 1132 in 3 days, how else could you count it from here?)

A huge overlapping Ending Diagonal wave [c] move for the market would also be a fitting way to end the struggle that Minor 2 has displayed so valiantly for the past 2 months.

Simple: The market has seen its highs and today's midday rally was just a retrace back and down we go in Minor 3 tomorrow. Perhaps GDP report is a real wake-up call to the market (maybe they report 1.5% growth)

(side note: The 5 wave move down on the DJIA from today's high actually makes a nice c wave in an expanded abc flat....just to throw that monkey wrench at you.)

E-minis [Update 3:20PM]

[Update 3:20PM: It sure would look nice as a wedge move. That gives credence to the expanded flat Minor 2 count - with an ending diagonal for the massive [c] wave. It doesn't much matter at this point as the final move would imply the same thing; complete the wedge. That would imply an "ABC"-type three move from the low today to a peak.

As long as the lower wedge trendline holds, we'll throw this pattern up here and see what happens. At the least, I don't see (yet) any 5 wave patterns down on the SPX.]

Dollar finally broke down overnight, delayed from what I posted yesterday Heading toward the 50% Fib.

Overall pattern here

Euro is thrusting out also of what appears to be a final triangle
E-minis hourly looks like it has corrected enough while managing to maintain price. The MACD histogram has some overnight momentum behind it.
GDP preliminary report tomorrow and the entire market waits in anticipation. 

Wednesday, July 28, 2010

Elliott Wave Update ~ 28 July

Primary count is wave (iv) of [c] is over or almost over.  A close alternate is that we have seen Minor 2's high on some indexes if not all.

On opening today the CPC spiked down to .44 such was the conviction that the bullish-looking triangle created yesterday was going to break big upside. But it didn't. Everyone is waiting for that final upside (or if your really bullish, waiting for big upside). Sometimes we have a habit of pushing for that last squiggle wave that never comes (up or down). I am usually guilty.

Wave (iv) of [c] interpretation has almost run its course.  The DJIA had a beautiful triangle going and it also failed.  Yet as long as the S&P hangs above 1100 or so, don't consider wave (v) of [c] dead just yet. But the more it pulls back, the more its upside target is damaged.

So, the wave (iv) is by no means dead just yet for some indexes, but having a new recovery high in all indexes is quite damaged. The NASDAQ took a decent hit down today. Negative divergence on the hourly RSI is apparent and seemingly playing out. The NASDAQ has formed a serviceable base channel. Apple looks damaged.

You can see a 5 wave pattern down from Minor 2 even from this distance.
The DJIA triangle can still be a triangle I just flipped it to a bearish one.
And here is the larger picture on the DJIA. Bounced at the triple intersection of the base, wave and deceleration channel lines.
SPX could still be a wave (iv) but it cannot take too much more of a hit I wouldn't think. The SPX has no virgin wave space left even on this 30 minute chart.  So its overlapping which generally I take it as its running out of momentum.
And the DJIA and TRAN do have an intraday divergence.

E-minis [Update 3:12PM]

[Update 3:12PM: The DJIA triangle that failed is of course bearish for the bulls.  However the DJIA is just now settling back on its base channel. How it deals with that will be telling. We do have the alt count]

[Update 2:15PM: It would be a shame if this triangle failed as its such a nice one.]

[Update 1:05PM: Update on the DJIA triangle. Either its over (with the e wave tracing a mini triangle) or just hitting "d".]

[Update 10:05AM: Just throwing some counts out to see if they stick. Triangle in here somewhere.]
[Update 9:55AM: Zooming in on what appears to be wave [v] of C of (2) for the dollar, we could be looking at a thrust out of the small (iv) triangle to the dollar wave (2) bottom.]
The four hour candles on the SP e-minis is showing a bit of negative divergence with the previous MACD peak. This shows up on the cash index charts too. It also has a slight MACD bearish sell crossover and red MACD candle history. Its not screaming "down we must go" but then again it is showing some loss of momentum which we are looking for.
FTSE target is the blue box area. Getting close. A perfect expanded flat target would measure to around 5499.

Tuesday, July 27, 2010

Elliott Wave Update ~ 27 July [Update 7:56PM]

[Update 7:56PM: The market is again challenging one of the big 3 mass market sell decision points candles.  There are 3 of these candles and they are based on scary downside internals.  The first was the May 6th flash crash.  The last was the June 29th big bear day. The market has recently managed to finally get away from that candle and it now has moved to the middle bearish candle - the May 20th big bear day with 73 down volume ratio on the NYSE and 19.44 decliners ratio.

We can see that the June high tried to get above this mass market bear candle but was quickly reversed after a few days of consolidation near the top of it and then produced another sell decision candle - June 29th.

We now have the same situation we did in mid June. The market is, in effect, trying to reverse this 20th May mass market decision point and achieve "escape velocity" from it.  I don't think that will be easy and in fact the market should fail in this area..

Today was just such an example with the price action: The market tried to gap up and run over the top of this May 20th candle and it got quickly slapped back down.  Then it tried briefly again in a weird second spasm. Also notice how it closed less than 1 point under. Weird huh?  The market knows where its at. 

And of course the moment the market tries to make a real move above it should end in failure and mark the top of Minor 2.

Market internals are getting weaker and weaker these last few days.

So the market has already spoke to us and left a clear map. It had painted a mass market sell decision point and the market doesn't forget where this spot is at. It will not be re-conquered easily even for a gap up spike-and-run. In fact, its a good bet it won't be reconquered at all.

I suppose the market will hang around until the 30th July preliminary GDP report release and then attempt to run over the candle top. Short the crap out of it is the game plan.]

Nothing much to add. Price action is converting one bear at a time to cover or turn bullish. Sentiment is correcting for wave 2.

The price spike this morning is usually labeled as a subwave iii of (iii) or marks the top of (iii) itself. Its just another clue of where we are likely in the wave structure. Obviously a triangle (that may break downwards first) traced today so we don't yet have any impulses down.
If we use the truncated low of 1015 SPX, we get [c] = [a] at 1040 SPX.  78.6% of [a] from the 1010 low gives is a 1026 target. So that seems a decent target range for Minor 2 (1026-1040) and the subwaves seem to agree. 1140 is also the 61.% Fib marker.
Forming a new head and shoulders pattern. This one is more bearish with a down-sloping neckline.

E-minis [Update 10:20]

[Update 10:20AM: Looking at the DJIA, I'm looking for a move back to the base channel for wave (iv) of [c]. I think we topped in at least (iii).
We also have a potential extended 5th wave on the DJIA and that you just saw the top. We have certain levels to look for for this mainly if the base channel fails to contain any pullback.]
Still in (iii) of [c] up by my count

Monday, July 26, 2010

Elliott Wave Update ~ 26 July [Update 8:28PM]

[Update 8:28PM  I corrected the 1930 DJIA chart down below, I had the recovery doubletop in the wrong spot.]

[Update 8:10 PM: Suffice it to say these are the same charts I have been showing and here is an update on most.

VIX: Breaking down into the gap new recovery low. In Minor 2 target range.
Dollar new recovery low. In Intermediate (2) target range.
CPC 10 day MA may be turning up or have one more recovery low.
BPSPX: Finally moving toward Minor 2 target range
NASDAQ close to forming a base channel. In Minor 2 target range.
NYMO: Extreme overbought.
TED: In Minor 2 target range. Closed outside BB. BB getting tight.
NYAD: Would love to see major divergence with SPX price and have this go to new high.  Of course if the NYAD goes to new high throw out my wave 2 NYAD count.
Finally DJIA and its nice little recovery high doubletop post 1930 rally before breaking down in the Great Depression. Look familiar?]
Primary count is that wave (iii) of [c] of Minor 2 is tracing out.

I like this 30 Minute SPX chart. I think the RSI and overall "look" shows where we are in the wave structure. How high do we need to go? Well sentiment is probably starting to seriously correct toward to the bullish outlook.  S&P closed over its 200DMA today by a few points.
Fear charts getting there.