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Wednesday, July 6, 2011

Elliott Wave Update ~ 6 July 2011 [Update 8:36PM]

[Update 8:36PM:

Market sentiment data is a function of price and time.  For longer term data sets, you need more price over time to achieve useful extremes.

A few weeks back, when the market was tanking, I was pointing out how Intermediate term sentiment data,  those that track weeks/month time frames, had swung into extreme bearishness ranges on many. Now after the rebound, they have started to recover. I have a few examples.

A thesis on how this Intermediate sentiment data fits into the larger wave count is this:  Sentiment extremes in these types of indicators can peak on a 3rd wave. At a fifth wave, it can diverge a little. However, it should still be sufficiently bullish to be able to site a "top". So we can expect these Intermediate type data points to tack toward their previous wave 3 extremes but most could fall short. That is ok and even normal. This is assuming we are in Minor 5 up of course which the wave pattern seems a good fit at the moment.

Via Sentiment Trader, the latest II survey:
Bulls are still low and "correction" expectations are high considering we just had a long multi-month correction.  Note when "correction" was the lowest in late 2010/early 2011 the market started to embark on just that - a correction.  Again, sentiment data is a function of price and time. Persistent price over time will shift the sentiment data back toward a "top".  We may need more bulls still if this is Minor 5. That will take time and price of course.
II Bull ratio. Not at an extreme either way. If we get back toward 1370, I would expect this to be back toward its previous high but perhaps diverging with it. Again a function of price and time.  Takes more price and time to get this back toward bullish extreme.  If we are tracking Minor 5 up, then we must assume this will head higher too.
Bears are still on the lowish side. Based on this alone, it should be a long-term concern for market bulls.  This is not a setup for a "third of a third" Primary wave up.   It does however fit into a setup for a major peak such as P[2].
And here is Sentiment Trader's chart labeled appropriately "Intermediate-Term Indicator Score" which is yet another comprehensive composite model which includes a myriad of market-based technical sentiment data, surveys and proprietary data and stuff. Note the recent extreme bearishness. Well that has changed hasn't it? Price and time has accomplished much. But still not yet extreme bullish. Will take more price and time....
Sentiment Trader's Composite model has begun to recover quite sharply. The longer 21 day MA will of course take time.
CPCE 3 and 10 day moving averages have corrected back down nicely. But a longer term MA such as the 21 day I show, needs more time (and of course prices to maintain at least).
Using these Intermediate term indicators in conjunction with wave patterns helps us determine what the overall wave count may be. If the market had 5 Minute subwaves down (to form a Minor 1 down) in conjunction with these sentiment data lows, we can surmise that this is merely a sharp wave 2 rebound and count it as such and not to expect bullish extremes again

However I don't think we can confidently count 5 waves down or even confidently show the recent down move as impulsive.  Therefore we must surmise that these Intermediate term sentiment indicators are heading back toward a bullish extreme (but likely will fall short of the Wave 3 extremes) in conjunction with new market highs - i.e. - Minor wave 5 up.  Thats EW theory in a nutshell.]

[Update 7:20PM: Wilshire weekly. Interesting comparisons with 2007.
[Update 6:50PM: Gold and the Dollar. Each looks like they may have one more set of moves left in them. The dollar down, and gold up to new highs to fulfill wave counts.

Under these counts in combined with our Minor 5 up count in equities, Dollar hits lows (but stays above 2008 lows), Gold hits new all-time highs, and equities makes a new P[2] high in some or even most indexes).

Intermediate (4) triangle on the dollar?  If so prices are barely below (1) and would have to turn down now.
[Update 5:45PM: At the Supercycle line.]
[Update 5:21 PM: Using the Wilshire5000 for form, here is a squiggle count based on Minute [iii] of Minor 5:
The primary count is now Minute [iii] of Minor 5.  This is based on price action, technicals, and NYAD wave counts. The alternate is a Minor 4 triangle which allows for a nasty [e] wave.

Today's pullback could be a key subwave (iv) of [iii] of 5 pivot low for Minor 5 count.
Hourly SPX chart.  You can see the [e] wave is a wildcard count at this time. It would be "unexpected" (and hence would make a great [e] wave.)  This is why today's price low I think is one of the key to the counts.
A nice impulse up coming off today's price low. Again, today's price low is key I think.

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