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Wednesday, June 1, 2011

Elliott Wave Update ~ 1 June 2011 [Update 8:38PM]

[Update 8:38PM: What short term sentiment data point could be an excuse for a late July thrust Minor wave 5 to new highs above 1370?

How about a debt ceiling compromise (well more like a cave-in by Republicans)?  Not saying this would have much staying power but a "thrust" ending and exhaustion reversal would suit the wave forms fine. Lets face it we are screwed.  If the markets can make it that long....

[Update 8:33PM: I mentioned we are likely nearer a turn in the stock-bond ratio when I posted my 30 year yield chart below.  Well here is the ratio chart via the always excellent Sentiment Trader 

As you can see, this sentiment data is aligning pretty well with a soon-to-be-expected 30 year yield Intermediate wave (2) low.
[Update 8:14PM: Its not just the US markets that have seemingly unresolved wave counts. For instance the FTSE we can also imagine we are in a complex [c] wave of a triangle and that its (C) will equal (A) in time at 13 months.
[Update 7:46 PM: Short term squiggle count keeps its simple for now.
[Update 7:30PM: Accounting for the dollar if imagining a market that tops in August after a Minor 4 triangle, one could see another low coming. The count and pattern certainly allows for it and would be considered a potential multi-year double bottom pattern.
[Update 6:47PM: 30 year yield count is finally about to challenge my blue box area created from the virgin space on wave (1).   Possibly wave (2) bond yield low corresponds with wave [c] price low in the SPX. Its a good guess as stock/bond ratio is getting closer to a turn.
[Update 6:18PM: The best long term primary wave count is still the Minor 4 triangle. Hence, 1280 as I mentioned earlier is a likely stopping point for wave [c] if thats the case.

What eliminates the Minor 4 triangle? Well obviously lower than 1250 SPX but any break under 1280 is pushing things for a [c] wave low.

Here is a revamped example of a Minor 4 triangle with notes:
Well it wasn't a gap down day, just some plain old bear selling that took back 4 days of last week's advance in one day on volume. Close near the low.  Some observations from more of a technical standpoint:

1. 1345 has now proven to be serious resistance that has hardened.

2. We are again testing the 20th April gap and candle zone major support at 1312.  Keep testing and it may break. I got to think its going to eventually break based on today's downside technicals that should result in eventual follow-though.

3. A break of 1312 SPX, likely means we are heading to at least 1280 as a near term target with a small bounce at 1295. I have 1280 as the next potential significant "must defend" zone. However a more bearish selloff and 1280 won't hold long either if this is a wave (iii) down.

4.  Down volume ratio on the NYSE was the greatest since August 2010. However declining stocks were not even the worst in 2011.  NASDAQ was 91/84% split in those 2 categories You can see both indicators on my candle chart below. All in all, today did serious technical damage at nearly the same range as a week ago.

5.  So we have support at 1312 that has been defended on numerous occasions. We have 1345 which is significant technical resistance.  With today's bearish ending and numerous support "tests", odds are it will be easier to break 1312 support than to repair the technical damage created by today's candle downdraft particularly after we had 4 days of technical "repair work" destroyed in today's down candle.  Thats demoralizing.

6. As far as the breaking the "lower highs", the SPX failed. The Wilshire5000 managed to briefly do so yesterday but the SPX did not by less than a point.

7. A lot of intraday indicators are extremely oversold such as TRIN, price oscillator, tick, and volume ratio, and others.  We can expect a bounce tomorrow, but if its a wave (iii) down the bounce may be slightly vigorous but should fail vigorously also.  A dead cat bounce would be fitting.
8.  It appears the leading diagonal count could work here. Question is, is it a leading diagonal of an (a)(b)(c) down or is it a leading diagonal in a wave (iii) down?  Both wave (iii)'s and (c)'s can look the same for a while but in the end, for a five wave move you should get at least some kind of wave (iv) and (v) particularly if your wave (i) was a leading diagonal.

9. Pretty bearish down day technically on volume and the most important thing is how it follows through.  I think 1312 is significant as I talked about the last 2 weeks. In other words, the bulls don't really want to give it up. Even if we have a dead cat bounce, I kind of expect that the writing is on the wall, and 1312 will fall.

Tick, tock...DOW theory non-confirmation still on the clock...

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