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Thursday, March 31, 2011

Elliott Wave Update ~ 31 March [Update 8:27PM]

[Update 8:27PM: I haven't given up on the idea of a huge ending diagonal triangle in IYR. One of the attributes of an ED pattern is a price collapse from exhaustion. That obviously has not happened so we must suppose it will yet again make a new high. I see no "blue box" areas in (C). Nothing but overlap and wedging.
[Update 7:35PM: Transports short term count may carry it near its all-time daily closing high. But probably comes up short.]
Dollar count hanging tough.]
[Update 6:59PM: Read, bookmark and email this this article  to as many misinformed people you can find. Found via Zero Hedge.

As I, (indeed most of the regular readers of this blog) also follow my three favorite blogs  , Mish and Karl  we are well aware of the details of the pillaging of America that has been going on.

But never have I see it presented so concisely. Again, email that article to everybody you know regardless if you think they will "get it" or not.

[Update 6:18PM: 30 year yield count]
[Update 6:02PM: I added a mid-channel line to the DJIA chart below. This convinces me my blue channel is relatively correct as P[1] bounced off the mid-channel line nicely.]
[Update 5:53PM: Channels can be somewhat subjective, particularly over an 80 year period. However I like my Supercycle channel line better than EWI's.
The crash in 2008 occurred when it could not regain this line. It would make a fine target for Minor 5. Remember the whole premise of those who propose a P[3] up is that the market will bust through this line and accelerate upwards. Lord help us if that happens as the bubble will be more dangerous than ever.

We shall see if the market is ready to dance again above this line.

Today went as expected. Consolidation Minute [iv] of Minor 5 is the count.  Looking for a flat or triangle but it seems all the corrections so far have been zigzags. So any will do and I would expect [iv] to overlap into SPX 1319 price territory minimum.

Gap down (or up for that matter) might be what the market is setting up for and then it gets covered.


Wednesday, March 30, 2011

Elliott Wave Update ~ 30 March [Update 8PM]

[Update 8PM: There are a myriad of reasons why this is not a P[3] UP. This chart lists some of my bigger sticking points but certainly I would love to hear more reasons - I ran out of chart space.]
[Update 6:42PM: Squiggle count was fun to do today. Not sure if the last segment hit its high today or not.]
[Update 5:03PM: Another look at the SPX count using the 30 minute chart.]
Primary count is Minute [iii] of Minor 5 of Intermediate (C) of P[2] topped today at 1331.74 or will shortly tomorrow a bit higher.

A Minute [iv] pullback to test support and perhaps close the gap would seem to be in order. Minute [iv] target range is 1313-1319 SPX.
Wilshire in Non-log scale
Log Scale:
A Zweig Breadth Thrust was not triggered today. A move from under .40 to over .61 was required within a 10 day window.  Today was the 10th trading day.


Tuesday, March 29, 2011

Elliott Wave Update ~ 29 March

On Friday's update, I showed a chart  that suggested "We have a blue box virgin wave space on this up move.  If we imagine this is the middle of an up structure Minor 5, then it ideally shouldn't be retraced into completely.  This would be your approximate "dip buy" spot if you are in the Minor 5 camp."

Thus this virgin wave space may mark the approximate middle of Minor 5 of (C) up

On Monday I was sure we were due for a breakdown of this (false) virgin wave space in at least a Minute [ii] of Minor 5 pullback.  The end of the post stated the one caveat of course "This depends on the virgin wave space shown breaking down."

So what happened today? The market dove at the open to this exact support spot and thus the open wave space or "blue box area" was untraced on both the Wilshire5000 and SPX. It was indeed your "dip buy" spot as I suggested Friday. So today's wave action strongly supports the notion of Minor 5 to new highs.

This could also further suggest that Minor 5 is not messing around and is heading straight toward its peak in a quicker fashion than anyone anticipates.
Note the blue box area on Minor 5.  If this holds true, we are projecting a Minor 5 peak just about or slightly above where (C) = .618(A).  Note: The Wilshire seems to have a false print Minor 4 price low. My Fib is placed at the correct spot.
Now what does this all depend on? Again, the blue box virgin space holding without any price retracing.  New high in the NYAD cumulative A/D line seems to point that the market will indeed be challenging its 1344 high in Minor 5.

Monday, March 28, 2011

Elliott Wave Update ~ 28 March

If your in the Minor 5 camp, the market may be due for a Minute [ii] pullback. There are other versions of the Minor 5 trek including a Minor 4 triangle in development.
And if your in the leading diagonal count camp, there should be a deep downturn that takes the SPX back to major support at 1200-1220. Although the wave [iv] retrace was deeper than 81% guideline (by about 3 SPX points), "look-wise" it might still be a possibility.
Both charts depend on the "virgin wave space" shown on the top chart breaking down.


Friday, March 25, 2011

Elliott Wave Update ~ 25 March

Leading diagonal count is likely null and void as a wave pattern for the SPX as the retrace was too high. Its certainly a high retrace in the DJIA.

We have a blue box virgin wave space on this up move.  If we imagine this is the middle of an up structure Minor 5, then it ideally shouldn't be retraced into completely.  This would be your approximate "dip buy" spot if you are in the Minor 5 camp.

It still counts best as a double zigzag up at the moment.  But if we see some further wave fours and fives fill out, then it would be a better-looking impulse. Monday is the key day for this structure.
 The upper blue channel line is the Supercycle line. Keeping an eye on a potential Zweig Breadth Thrust event.  


Thursday, March 24, 2011

Elliott Wave Update ~ 24 March [Update 9:07PM]

[Update 9:07PM: Squiggles. I really am trying to find a bull count in here but the only one is a 1-2,1-2,1-2 with the third 1-2, supposedly a subwave, being the largest which doesn't work well.

Hence the double ZZ.
[Update 5:20PM: Alternate count calls for at least sharp Minute [ii] of Minor 5.
No matter what your opinion about my leading expanding diagonal count, you must admit it has guided us correctly to exactly the sweet spot for the proposed formation. The past few days I called for an ideal move to 1308-1312 SPX before Minute [iv], a proposed double zigzag, ended. Well we are here and the double ZZ Minute [iv] looks wonderful.
Via Sentiment Trader we have their short term model, or STEM MR which is a concoction of the S&P 500 price oscillator, cumulative tick, put/call ratio data and TRIN molded into one indicator, at an extreme overbought level. I haven't seen it this extreme in quite a while.

So at the least, the market needs to work off this overbought. The key for bulls is if the overbought gets worked off in yet another "running" correction that maintains prices somewhat and holds key supports. If not, volume comes back in and drives prices much lower ala the primary count - leading diagonal.
I'll have more in a bit.


Wednesday, March 23, 2011

Elliott Wave Update ~ 23 March [Update 7:50PM]

[Update 7:50PM: It is not without good reason I have a leading diagonal as the primary count in the US markets. When we look at other world markets, we see that a 5th wave down for them too is certainly a good stance to take considering some of the charts are trashed like the DAX. But a few examples:
India has been going sideways. Soon also due for a wave [v] if it is to come.
[Update 7:25PM: EUR/USD long term chart.
[Update 5:15PM: I like to "look test"  Minor-sized counts and above on a daily chart. In other words, you should see 5 waves down, you should see the a-b-c three wave corrections.  In this case you should see an expanding shape if this is an expanding LD. So far on all counts, it looks good on the daily. We just need it to actually follow through and happen.]
Prices have broken over the upper down channel line as we expected to occur for my proposed expanded leading diagonal count. We now have a "diverging" [i]-[iii] line versus the [ii]-[iv] line for our proposed expanding leading diagonal.   It would look better if it diverged a bit more with higher prices.

Our Minute [iv] target range is 1303.98-1316 based on EWP's guideline of 66-81% retrace of the previous wave [iii] down for a leading diagonal count.  We have an uncovered gap in that zone and the 20 and 50 DMA just overhead at 1302-1304ish.  An ideal target range would be a visit to the down candle on my 30 minute chart in the blue box area 1308-1312. Then a downturn must occur.

So we have a setup for a Minute [iv] peak and subsequent Minute [v] downturn to lower lows.
The alt count is of course the Minor 5 to new highs. I haven't discussed this much lately because I think it is a lower probability.  The squiggles are not yet forming any kind of coherent impulse pattern up - only zigzags in my opinion so far which is consistent with a counter-trend rally wave. For instance you'll notice the overlap today with some previous pivots.


Tuesday, March 22, 2011

Elliott Wave Update ~ 22 March [Update 6:09PM]

[Update 6:09PM: Bond count. Still working lower.
[Update 6:06PM: Dollar count hanging tough at the moment.
Today's price action perfectly reinforces the primary count of a leading diagonal Minor 1.  Minute [iv]'s target range is 1303.98 - 1316.  Today's retrace down would be the second "b" wave in a double zigzag Minute [iv].

We didn't yet see evidence of impulsing down today so we must assume today's lackluster day is a corrective wave. Small degree "b" wave certainly fits the bill here at the moment.

For the moment, the down channel is containing prices. If the price action can escape that channel, we might expect a final pop up which would fulfill the price range requirement and double ZZ form .
On the daily, we might expect the market to touch and try to re-take the 50 DMA currently at 1303.76 which is just shy of our minimum range of 1303.98.


Monday, March 21, 2011

Elliott Wave Update ~ 21 March [Update 6:31PM]

[Update 6:31PM:
I have tossed aside the [i]-[ii], (i)-(ii) count for a simple reason that it doesn't look right in that this subwave (ii) of [iii] is a larger correction than the next higher [ii]. This is particularly true if we have higher prices tomorrow.

With that in mind, lets explore the Leading Diagonal count and I'll post rules and guidelines per "Elliott Wave Principle, Key to Market Behavior" (Frost/Prechter):

Pg 40 of EWP (in my copy anyway) discusses leading diagonals:  "....leading diagonal can take an expanding shape. This form appears to occur primarily at the start of declines [Daneric: their emphasis, not mine] in the stock market."

* A Leading Diagonal always appears as wave 1 of an impulse....

I am postulating that Minor 1 of Intermediate (1) of Primary [3] down is a leading diagonal of a much larger impulse pattern.

* Waves 2 and 4 of a leading diagonal always subdivide into zigzags

STATUS: Rule satisfied in this case.
Is it not curious how wave (c) of Minute [ii] just had to finish higher at 1332.28 above wave (a) of [ii]? Why did the market strain for this?  Because it was a zigzag pattern and by rule, zigzags in all but the rarest cases I suppose, the (c) wave was required to finish above the (a) wave.  And thus it did.

PROJECTION: I have projected that Minute [iv] would be a double zigzag pattern since it could not satisfy price requirements with one zigzag pattern, it would have doubled its form to attain price. This would satisfy the ZZ requirement for [iv].

* Wave 4 always ends in the price territory of wave 1

STATUS: Rule satisfied in this case.

* Going forward in time, a line connecting the ends of wave 2 and 4 diverges (in an expanding diagonal) from a line connecting the ends of wave 1 and 3 

STATUS: This rule will be satisfied if we get higher highs tomorrow to the 1304-1316 price window for Minute [iv].

* In an expanding variety, wave 3 is always longer than wave 1, wave 4 is always longer than wave 2, and wave 5 is always longer than wave 3.

STATUS: This rule is satisfied so far in that [iii] is longer than [i] and [iv] is longer than [ii].
PROJECTION: Since wave [iii] is 83.23 SPX points long, wave [v] should at least be 84 points long. Therefore if wave [iv] ended at say, 1313, subtract at least 84 SPX points you get a minimum target of 1229 SPX for Minute [v].

* Wave 2 and 4 usually retrace .66 to .81 of the proceding wave. 

STATUS: Wave [ii] retraced 76% of wave [i] which satisfies the guideline. Wave [iv] should retrace 66-81% of wave [iii]. This target range is 1303.98 - 1316.47 to be precise.

*Waves 1, 3, and 5 of a leading diagonal usually subdivide into zigzags but sometimes appear as impulses. 

STATUS: The current ambiguity and difficulty of the decline of [i] and [iii] to form a coherent subwave count satisfies this guideline in that it has a "hybrid" look about it - part impulsive-looking, part corrective-looking.

* Within an impulse, if wave 1 is a diagonal, wave 3 is likely to be extended.

PROJECTION: If this is a leading diagonal decline Minor 1, Minor 3 - sometime down the road a few weeks or month(s), is likely to be a very sharp and deep decline.

* In an expanding variety, wave 5 usually ends slightly before reaching a line that connects waves 1 and 3.

PROJECTION: You can see if wave [v] were to decline at a rate suggested in my SPX 30 minute chart, this guideline would be satisfied  It would come close to the [i] - [iii] line but fall short of it.

Obviously the rules and guidelines of a leading diagonal are fairly specific. So the end result is if the market does not behave as outlined in the discussion above we can simply toss this count aside.

[Update 5:33PM: I updated the 30 minute SPX chart below with a precise target box for Minute [iv].  Prices derived from 66-81% retrace of Minute [iii] as per EWP. Target for Minor 1 low could still be the 2010 high of about 1219 SPX if Minute [v] is longer than [iii] which you might expect in a expanding diagonal pattern . Of course only a new low under 1249 is required.

Original Post:
PRIMARY COUNT is that the US markets is tracing a leading diagonal Minor wave 1 down and working on Minute [iv] wave. The leading diagonal should probably take an expanding shape.

Not only is the US markets merely a three wave down at the moment but so are most major world markets.

Europe's markets and Japan (and others) all require another wave to a new low to complete an initial 5 wave impulse lower. All of Europe's markets and particularly Japan had robust wave [iii]'s down but now require wave [v]'s. The US market is overlapping obviously.

So the #1 reason I am not buying the Minor 5 to new highs scenario is that if Europe's markets and Japan experience a wave [v] of Minor 1 down then the US is likely to align with that same downturn and experience its own new low which is required of a leading diagonal count.

According to EWP, each corrective leg of a leading diagonal should correct the preceding wave by .66 to .81 percent.  Therefore we can expect Minute [iv] to hit a retrace target range of 1304 - 1317 calculating from the Minute [ii] peak of 1332.
A final wave of a double ZZ would place it into the target range of 1304-1316.  
I postulated this LD count last year and discussed it in depth. It did not pan out obviously.  The "marker" for this pattern currently is above the .81% retrace or about 1318. If it traces higher than 1318, the LD count is probably bunk here too.

The big difference is that last year's LD count was more of a contracting or "falling wedge".   This would likely be expanding in shape which is more of an expected wave shape as a beginning wave off a major high.