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Thursday, July 1, 2010

Elliott Wave Update ~ 1 July [Update 10PM]

[Update 10PM: And a variation on the squiggles. This count supports a gap up opening and run-up a bit. Yes the final [E] on the triangle is ridiculously tiny but it happened at closing and the e-minis better reflects this possible count.]
[Update 9:42PM: Squiggle count based on that this is a wave (iv) of [i] bounce and that it needs to retrace to a minimum 1035 SPX prior to any downturn to a new low under 1010 SPX.  Some kind of combination b-wave flat-zigzag-flat perhaps is forming.  Or a "b" wave triangle that will need further time tomorrow to develop.

Of course it could just head to a new low tomorrow without making further highs that would be acceptable also. In that case we could consider the peak price today the top of wave (iv).  We have near term support (it would be 1021-1022 on the SPX) to watch.

So today still looked like a dead cat bounce in the waves (even though it bounced some 20 SPX points!) which supports (iv) of [i] rather than [ii]

I am not married to the count. Perhaps Minute [i] had its low.  An aggressive move up with strong internals from here may indicate that it is in play.  Minute [ii] target is above 1050 SPX, and likely much higher if today was Minute [i] low. Bottom of the "flash crash" candle at 1065 is a target for Minute [ii].

[Update 9:15PM: I'm really rooting for Gold. I really am. I don't have a position in it for or against yet I sympathize all the retail and the many, many professionals who swear by it. But being an E-waver and applying an honest count,  I can count to a solid [5] primary waves which suggests that a cycle wave event in gold is nearing an end and is due a cycle wave correction.

Will it have its blowoff top prior? Does it need to?  Perhaps because so many certainly expect (and I have seen many articles arguing this recently) it never will happen and instead is just having a "normal" wave pattern. But if I were to objectively look at this wave chart below along with negative divergences, I have second thoughts on a continued move up.

Until today's very bearish downturn, I was speculating that gold will get a surge on a continued pullback in the dollar. Perhaps it still will but it needs to get up off the mat pronto.

The reason is the weekly has a double negative divergence on its indicators all the while painting a picture-perfect EW technical picture along with wave patterns.

EWI has shown that some recent daily sentiment readings have reached all-time extreme at the price peak.  No matter how much you root for gold, sentiment is what matters. And like we saw on the dollar a few weeks back when daily sentiment reached extreme, we suspected a downturn was in store.

I am not saying gold will collapse back to whatever and that its the worst buy ever. It could just bounce slowly and inexorably down and ever down for years as it went up for years. My ultimate target sometime in the future is $475 minimum.  Could take many years for that to happen.

[Update 5:33PM: The dollar chart again. B wave contracting triangle. The apex may mark the C wave low in time which would be July 16-19 approximately or about 10 more trading days which seems doable.

Technically, it lost the neckline, and the 50DMA.  Lots of people are scratching their heads about the move on the dollar today but I have been saying a C wave down is likely coming. Thats why I love EW.  For those trying to tie the "reasons" for the move and justifying it with whatever they seem to dream up, wavers have no need for all that noise.

Lets hope it plays out nicely. Maybe we'll hear all the old talk of how the dollar is doomed again.

Price target is a rough guesstimate.  If its a wave (2) as our count 50% should be expected but 62% is certainly normal too. 200 DMA is a nice spot too.

[Update 5:22PM: Sometimes I really get lost what century I am in when I am typing real fast. I corrected "1135 price target" below to what I meant: "1035 price target".  I do that from time to time so if it seems odd, its likely my typo...

[Update 5:10PM: The dollar broke down today in what we hope is a Minor C wave of Intermediate (2) pullback.  Barrier triangle for B wave is the best interpretation for now.  Big red candle today on volume.]

Primary count is that a Minuette (iv) of Minute [i] of Minor 3 counteretrend rise is playing out.  Target window is ideally 1035 - 1046.  It could be less but it really shouldn't be more than the previous subwave iv price high of 1048.08.

The wave pattern would look ideal if the counter-trend-rise led to a new low under the 1010 low today.  It could be a nominal squeaker low such as (v) = .618 x (i) @ 1008? or something more like (v) = (i) @ 998 or so depending on when Minuette (iv) peaks.

Overlapping wave fours basically work in mirror fashion to overlapping series of ones and twos.  So using that guideline, CORRECTION: (duh) 1035 would be a minimal price target.

Wave (v) of [i] should be in less intensity than the wave (iii) which shouldn't be hard to do as we can see just how bad three was.  Also the VIX may not rise as high as it was today's wave (iii) peak on a wave (v) bottom. Usually maximum fear occurs on a wave three. 

However maximum bearish sentiment will occur at the bottom of five .

Here is a scenario that you have thought of so it probably will not pan out: A "backtest" the 1040-1044 neckline and maximum shorts come out and the market goes to new lows on waning down volume ratio and less fear verifying a wave (v) of [i]. This neckline failure backtest causes traders to think the H&S pattern is now following through so they pile on maximum short.

And then they get squeezed at wave [i] low in a violent rally and the 1040 neckline is then retaken on the subsequent Minute [ii] rally.  A continuing rally has shorts baffled and eventually many capitulate afraid to short again. But alas Minute [ii] eventually peters out and the selling begins anew.

Basically Minute [ii] would be the market's last chance desperate rally prior to the "big kahuna" [iii] of 3 of (1) "point of recognition" moment that the primary count predicts.

We could see a dollar wave (2) low on Minute [ii] rally and possibly a GOLD blowoff top. These 2 items are largely speculative.

The big forest here is that Minor wave 3 is in play. Counter trend bounces tend to be violent in such large wave patterns even the wave fours sometimes!   But there are no guarantees in trying to predict the bounces in a Minor 3.
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