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Thursday, September 30, 2010

Elliott Wave Update ~ 30 September [Update 10:18 PM]

[Update 10:15PM: Actually, looking at the DJIA and Transports, I guess you can say there is a divergence at the moment that may fulfill a DOW theory bear signal.  Its not much to go on, but its something for now.  The DJIA chart still technically looks like it wants to rollover. Indicators support that notion for now.
[Update 9:50PM: The dollar doesn't yet look finished.  If I place the 50% Fib marker at the blue box area, it points to a lower target and no telling about time.  So the market may yet have a few surprises left until the dollar is ready to turn.

Combined with an uncertain count on the NYAD we have to see how the new month/quarter plays out for the first few days. There is likely to be a massive rebalance for big funds and no telling how that will get things moving. The NYAD needs certain pivot breaks to be able to get a better handle on its count or a reversal. Even today - a red candle day - had more advancing stocks than declining.  Sucking in bears one more time?

The other thing that bothers me as a bear is that the DJIA has retraced well above 78.6% Fib ( 78.6 = 10906). That alone *usually* means that it will head toward a 100% retrace. Although if you use EWI's orthodox wave 1, this is not the case so that alleviates some of that concern. But if the DJIA goes just above 11258, likely we will see a slew of divergences between indexes and maybe a major DOW theory sell signal (which I have yet to really see) in that the Transports do not make a new high above April and the Industrials do. That very much is in my mind.

These are the major things I ponder.  1) NYAD  (market internals)   2) DJIA has retraced above 78.6% from absolute price low  3) Dollar pattern (a strong dollar rally is probably paramount to P[3])

Resolving the dollar pattern is a major step. Unfortunately as bearish as sentiment is on the dollar, I cannot say it has bottomed. We are close yes I suspect but there has yet to be 5 waves up indicating reversal.

The next 2 days (Friday/Monday) will go a long way toward resolving a lot of markets).

As nice as it is to see 5 squiggles down on most every index, its still only an intraday squiggle count  No major support pivots were broken yet on today's market move down.
The indexes show 5 waves down but the dollar does not show 5 up. Its only three which fits my primary dollar count of wave [iv] of C. I need not even label them as you can see 3 waves up from the low. That is corrective which means the dollar has likely not yet seen its wave (2) low.
Pop to 1157+ bearish reversal with a clear 5 waves down on every index.

You can see 5 waves down on each index here. Also as a bonus, a 3 wave counter-rally.
 DJIA shows more of a wedge action than a triangle pop
However the SPX shows a triangle pop and perhaps reversal. The reversal went deeper than the "e" so that is a good reversal so far.
And as I first showed this chart back on Sep 15th,  t there is a certain equality in the bounce since the July low. EWI caught on to it and basically had this same graphic presentation on their update last night.
DJIA longer term count. The retrace hit a blue box virgin wave area (which I never expected) yet doesn't surprise me I guess.
Many of the parabolic stocks showed signs of cracking today. Here is NFLX on a big red candle with volume. See last night's chart for overall count
The NYAD is looking wedgy.  It could be that the SPX price high shall occur on Minor wave 3 of (5) of the NYAD count much as so far the SPX P[2] high has obeyed the NYAD wave (3) high. 

So something to watch for is perhaps an NYAD move down to the lower channel line (from the March 2009 lows) and then a final spasm higher.  The SPX may diverge at that point and not make a new high. 

So that would translate perhaps into a move down under (maybe to 1100?) to cover the massive SPX gap at 1125-1131 and then a spasm higher for a bit back up deep which produces new highs in the NYAD (and counts as wave 5 of (5) of [5] on the NYAD) but the SPX does not make a new high above 1157. That is one scenario that would fulfill the NYAD count for now. Just some thoughts on this, we'll see how it plays. 
I'll have more charts later as I have a chance to look at things and the data rolls in.
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