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Wednesday, June 22, 2011

Elliott Wave Update ~ 22 June 2011 [Update 8:05PM]

[Update 8:05 PM: Update on BKX.
From a squiggle count, the price action looks like an ED pattern
[Update 7:45PM: One reason to still be bearish is that there was no "clean count" to the recent 1258 SPX low.  The waves work best if counted in conjunction with what I have below perhaps.

It may turn out to be bunk, but it was sure fun to count and label.
[Update 6:40PM: IYR chart update.
Possible impulse down and 62% Fib correction and backtest.
[Update 6:15PM: Via the always fantastic Sentiment Trader, here is the "Smart Money" index I talked about earlier. Sentiment Trader pointed out the non-confirmation the other day in their morning report and since then it is still diverging.  "Smart Money" supposes the first half hour is emotion-based trading (i.e - "Dumb" money) and the last half hour of trading is the opposite.

So in past declines we can see Smart Money was buying at end of day.  This decline from 1370 has seen the opposite behavior with today no different.  The theory is that when Smart Money finally again shows buying interest (presumably at lower prices levels) then we would expect a significant bounce higher than we have.

For now the SMI indicates further declines are coming. This chart reflects today's trading by the way.

Its not foolproof but its a definite bear-side ledger item...

[Update 6PM: Again looking at the hourly chart, the MACD signal lines fully recovered and then some. Yet prices for the most part churned.  A perfect setup for a bearish reversal. Now lets see if the market thinks so too.
The premise is that yesterday's 90% up day was a "kickoff" day for the next significant upleg - be it a [d] wave in a triangle or Minor 5 itself (or deep wave two up if you prefer) - is predicated that yesterday's candle would not be closed under. In order for bulls to accomplish this they need to consolidate and break above near-term resistance of 1295-1300.

Stocks managed to hold the high ground for most of the day in very unsteady waves but the end of the day selloff is a bearish sign in my opinion. This is called the "Smart Money" (last 30 minutes of trading) and during the decline from 1370, there has been a lot of late day selloffs. This was not unlike 2007-2009 decline.

In short the bulls require a follow-through up day upside over resistance before we can confirm a kickoff day of some importance.  And they obviously failed today. The bears still have a formidable grip on the market and price action was very weak waves today on low volume..

There is a golden opportunity to reverse yesterday's up candle, and if this is P[3] down, "Smart Money" may be suggesting its going to happen. The count would look like this:

By the way thats a textbook expanded flat for Minute [iv].
Triangle count supposes the trendline will hold.
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