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Monday, October 31, 2011

Elliott Wave Update ~ 31 October 2011 [Update 8:35PM]

[Update 8:35PM: I am seriously considering changing my long-term count from P[3] down, to a double-three cycle pattern.  Nothing much has changed in terms of ultimate price and time targets. I still have DOW 1000 - ala 1970's support - as the ultimate bear market low. Nor do I disagree with Robert Prechter's thesis that 2016 will see the ultimate price low. He makes a rock-solid argument concerning time and price.

But form is another story.

Speaking of EWI, they have this as Intermediate (1) and (2) of P[3] down. This simply does not make sense in terms of price projections and form. If Intermediate (3) down of Primary [3] down is about to begin, its going to be one hellava long wave in consideration of how short in price (1) of [3] was since their target is 1000 DOW or below for the bear market low.

So again, if I change my labels to Intermediate (1) down, it'll be (1) down of Primary [A] of cycle zigzag wave y. (1) of P[3] simply does not make sense if your bear target is DOW 1000.  After all, the first subwave (1) of P[3] down should try to advance prices beyond P[1] (666SPX)!  Hence why I have been labeling my wave charts one degree lower than EWI.  But in fact I think we may be both wrong here.  I should be using Intermediate labels (1) and (2) and EWI should abandon the P[3] thesis as the way they have it labeled. Its going to look retarded after a while and they will be forced to change things.

After all, if (3) of P[3] down is beginning (according to EWI), then won't the biggest panic occur approximately where the same panic occurred in 2008? It doesn't make sense.  How can that be?  Again, I think they'll be forced to change things as they have labeled. Either they go down one degree in wave labels or they abandon the P[3] thesis and adopt something different.
This is based partly on the Consumer Sentiment chart shown below. Clearly we had a zigzag down. I propose sentiment will do yet another zigzag down to unheard of low levels.
I have Japan is a double zigzag from its peak, so the use of double patterns is not without precedent:
[Update 4:55PM: CMG. Has a wedge thing going and we got the new high today which was required minimum.
Primary count is Minor 3 down of Intermediate (1) of P[3] is in progress.

Last Friday, it was stated if the SPX breached 1256, or proposed wave (i) of [c] high price, we may be in a reversal.  It was breached on the SPX and Wilshire5000. So the primary count is that Minor 2's price high occurred last Thursday at 1292 SPX. We'll go with that and see if the market can "best" it.

By any measure, Minor 2 has retraced more than a healthy amount. In fact the retrace can be considered extreme in both time (short) and price for a wave 2.  So there really is no problem marking 1292 as Minor 2 in these extreme market times.
Which forces a squiggle recount of the rise from Minor 1 low at least on the SPX and Wilshire5000.  How about a double zigzag? In the end it doesn't matter much as it has a "three" look about it no matter how we count the squiggles.
The DJIA however still counts nice as a 5-3-5 zigzag.
The intra-day squiggles seems to be impulsing down. This leaves room for a bounce back up in a wave two if the market so chooses.
Again, Minor 2 has retraced a lot of wave 1. The DJIA had a nice back-test on its neckline.

Sunday, October 30, 2011

Friday, October 28, 2011

Elliott Wave Update ~ 28 October 2011

As shown yesterday, the market ran toward next resistance near 1292-1295 SPX. Its for this reason, plus a solid subwave count, wave (iii) of [c] was marked at yesterday's high.  Why? Because one would think there should be some consolidation - ala wave (iv) of [c] - prior to attempting to take out this resistance and move over 1300 SPX.

So in that light, today played out much as expected with a tight range yet no new high. Consolidation.

There was a triangle today that broke higher but we cannot assume it was all of pink (iv).  It may be part of a complex wave (iv) correction as shown on the Wilshire chart below. It could take a "stab" above 1292 toward 1300 but I still think it'll meet some selling and be part of wave (iv).

Just like when wave [a] took the market to 1220-1230 resistance, it took a week or so to chew through it and break above.  So same here. It may take a few days of work to attempt a break above 1300 SPX.  That "work" would be wave (iv) of [c].
SPX shows the alternate count wave (iv) today:
Perhaps the market tests the neckline on the SPX. Hence a wave (iv) low at around 1270-1272 SPX, yet still above the previous subwave iv of (iii) priced at 1265.02 pivot. That would be the "norm" for a higher degree wave (iv) to have a low just above a lower degree previous iv of (iii).

And of course the 200DMA could be tested at 1274 so it may just be that simple.
I like this following Wilshire 15 minute chart. Beautiful waves. This also imagines wave (iv) takes longer to consolidate before moving above next resistance. Hence there could be an expanded flat wave (iv) - taking a "stab" above resistance in a wave b of (iv).


I haven't posted a dollar chart for a long time because quite frankly, there is no solid count in my opinion.  All I can come up with is a possible support trendline.
Weekly all I can come up with is a bunch of lines for now. It just doesn't count well as an impulse up from the 2011 low.

Thursday, October 27, 2011

Elliott Wave Update ~ 27 October 2011 [Update 9PM]

[Update 9PM: Minor 2's target range is starting to take shape. I have been mentioning 1305 SPX since the Zweig Breadth Thrust. That seems within reach if we have another wave to go.  Looking at the charts and seeing how Minor 2 is taking shape, a higher target is certainly possible.

Minor 2's target range is 1305 - 1327 SPX.  I like the 1327 SPX because that means a bear candle gap down will be revisited on the SPY and most likely close. It is also the target for an expanded flat count for Minor 2.

1256 is a key pivot level. Any breach of that price - since we have that marked as (i) of [c] - and we likely have a reversal.
[Update 6:13PM: The non-confirmation in the 30 year yield is still intact.  As someone mentioned in comments, the multi-decade bond bull run reached a Fibonacci 34 years in September.  Bonds topped in...September.
There is also a non-confirmation between 30 year yield and prices. New price highs, yet yield low was not.
[Update 5:49PM: AAII bear percentage has been slain. AND this data came out today and does not include today's likely further sentiment swing.
[Update 5:45PM: Breadth Thrust shows no negative divergence yet. (Doesn't have to, but again, its something to look for if it appears.)
[Update 5:38PM: 6 month yield count. Looks finished. Rates to rise. Defaults, more Fed gyrations to no effect  Its all going to explode folks. The mathematics assures it.
[Update 5:32PM: GDOW in the box.  Like the rest, we assume its missing a wave or so at the least.
[Update 5:28PM: The world according to Mr. Ben Bernanke.
[Update 5:07PM: Squiggles using the Wilshire5000 for more precise form. (again consider the SPX in the same count)
Primary count is that the high today may be the top of wave (iii) of [c] of Minor 2 up.  Wave (iii) has expanded 1.21 times wave (i) within [c] so it may run a bit more. However, we do have 5 solid sub waves for (iii) so we'll just have to see. For now we'll label the 1292.66 high (iii) and adjust accordingly as needed.

What a burning star overall. Up 218 points in less than a month of trading.  I warned the Zweig Breadth Thrust event was something I respected and it has produced some aggressive prices advances. But like a rocket that goes straight up, when it runs out of fuel, it comes down hard.

Internals were not as stunning as you may think. The NASDAQ was not a 90% up day.  Up issues on the NYSE, though quite robust, finished the day at 87%.

Today stunned a lot of people.  The market has now captured everyone's undivided attention after languishing in the trading range of 1100-1230 for some time. So sentiment readings, both long and short term, have been jarred one way or another on every market participant.

The market has run run into next resistance and can be seen on the e-minis:
SPX 5 minute chart:
SPX Daily. You can see it ran toward resistance today. Getting through that without at least a correction would not be unexpected.  Hence, I labeled today's high assuming it may be (iii) of [c].
SPX hourly chart:
I'll have more as I get a chance to look at some stuff.


Wednesday, October 26, 2011

Elliott Wave Update ~ 26 October 2011 [Update 10:30PM]

[Update 10:30PM: e-minis on the move. Note the down move does not look impulsive (there is not a clean 5 waves down). The up move kinda does.

[Update 9:20PM: Look, I am certainly not jumping up and down screaming that the market must head much higher, if it all. Lets face it, the DJIA has already retraced a nearly perfect Fibonacci 61.8%. That has not been lost on most obviously which is probably why I don't even bother charting it.

However, I do like to see if certain favorite indicators have tipped their hand. One such is Breadth Thrust which I have spoke about in the Zweig Breadth Thrust event that occurred recently. I like to see a bit of negative divergence to tip its hand that an uptrend is getting tired and, at the least, due a correction (or an outright trend change). It does not have to of course, but often it diverges. (And then picking the correct divergence is always tricky). But in this case we don't have any negative divergence at all yet.  Well, maybe a little if we extrapolate.

[Update 9PM: Lets take a look at some sentiment data via the excellent Sentiment Trader site.

Minor wave 2's job is to relieve excess bearishness that wave 1's low produced.  Since this sentiment data is on a multi-month time frame, we need data that scales correctly. The trick is trying to determine what is  enough of a rebound. Since we are coming off the P[2] high, we expect a decent sentiment rebound.  At lower portions of P[3] down, the data likely will not rebound so robustly. But for now, its expected. My 2 favorite are:

Composite Model. A composite of a myriad of technical sentiment measures (such as put/call data), surveys, and proprietary measures.  Its just what its name implies a good composite of a lot of stuff.  This chart works very well for multi-month time frames.

You can see it has rebounded nicely.  Is it enough? Well, the indicators are pretty much still "headed up". There is no struggle yet indicating exhaustion nor any negative divergence. The 21 day average may be a bit too low still. Again, its a judgement call here. The market is never wrong though.
The next is another mish-mash of data compacted in one chart. Its similar in nature to the composite chart above.  Conveniently they call it the "intermediate-term score" chart.  It too has rebounded quite sufficiently.

So we can see, wave 2 is doing its job.
 But is it enough of a data rebound?  Here is a direct survey chart. Investor's Intelligence Bull Ratio. Fresh out today, it shows a rebound in sentiment yet is it enough?  Well, probably not for the first big wave two of P[3].  And whats the only thing that can make advisors more bullish? More price combined over time of course.
Here is one reminder why the market will likely struggle to make it much higher than 1300 SPX (if it does) and why we propose P[3] down is upon us: Mutual fund cash levels. Unless you think mom and pop are ready to  go back in the markets - (hint: they cannot - either they are broke and /or scared and/or ready for retirement) there is simply not much firepower other than leverage and margin. And we know how the market likes to punish high levels of leverage.
[Update 8:17PM: The only reason I propose wave (iii) of [c] up could be underway is that the wave count supports it.

The move from the 1256 high to the 1221 low is not very impulsive (5 waves down) and you guys and gals should know me by now - I can be very creative with the counts and imagine an impulse move when its not really so. But in this case, in all honesty, it doesn't count well impulsive down and yet it does count well as impulsive up. The market "quietly" advanced 25 SPX points off the 1221 low. That's not too shabby. So even if we turn out wrong, the premise of support at 1220 was correct for today.

Market internals looked pretty good today.  Fairly robust.

So that's what we have to go with for now. I'll post some sentiment data in a short while.
[Update 6:45PM: GDOW still has work left to do to reach its ideal wave 2 target.
Primary count is wave (iii) of [c] of Minor 2 up has begun.

E-minis [Update 3:20PM]

[Update 3:20PM: Updated squiggle count. We hit the 1220ish support today as suggested yesterday for wave (ii) of [c]. That places the market in (iii) of [c] up.

Tuesday, October 25, 2011

Elliott Wave Update ~ 25 October 2011 [Update 4:37PM]

[Update 4:37PM: Squiggle count for (ii) of [c] of 2.
[Update 4:33PM: AMZN's wedge was underthow and has resolved to the downside. One by one the high flyers have been getting cut down to size.
I'll be back. Got to run.

E-minis [Update 3:20PM]

[Update 3:20PM: Updated squiggle count:
[Update 3PM: Also rooting for CMG to fulfill its wedge. 
[Update 2:50PM: Taking a stab at AMZN again for the umpteenth time.  Hoping for a pop above the wedgeline to fulfill overthrow.  Could go either way though there is already a potential wave 5 of (5) high wedge (would be underthrow though)
[Update 2:35PM: Only requirement for c of (ii) is that it make a lower low than any price occurred in "a" of (ii).  Using Wilshire for form.  
[Update 2:12PM]