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Wednesday, November 30, 2011

Elliott Wave Update ~ 30 November 2011 [Update 7:50PM]

[Update 7:50PM: The overall health of the markets is reflected by the health of the financials. Both from their peaks years ago, to their peak this year.
And on closer inspection...the BKX

[Update 6:40PM: The Wilshire5000 is a key chart at this stage. This is the total market pretty much. It also has a clear resistance line overhead at 13775-13800. Aligned with the neckline of the topping Head and Shoulders pattern of earlier this year, then you have a formidable spot that will be tough to break.

(But perhaps thats looking too far ahead. Lets just get through the rest of this week first!)
And same chart with all the waves technicals we love to wallow over.
[Update 6PM: The DJIA is still giving off the best wave counts since the early October low.

Lets analyze the structure and deduce what we may expect based on tenets and guidelines of EW theory:

1. We have 3 waves up from the October low to the high. It counts well as a 5-3-5, (a)(b)(c) zigzag.  So its probably a solid "three".

2.  We have three waves down from the high to last week's low. It also counts as an (a)(b)(c) zizgag. Its a solid "three".

We have 3 up, and then 3 down. If the 3 down had come within 90% retrace of the 3 waves up, we could deduce a 3-3-5 wave corrective flat pattern. However the 3 waves down did not go nearly deep enough for a 3-3-5 flat pattern. Therefore we must deduce that the market is tracing a "double three" corrective for Minor 2. And since this is a wave two - Minor 2 - sharp zigzags are the norm.

We had 1 zigzag up. We had a zigzag down. The best projection for now is that the market will repeat the original October bounce pattern of another zigzag up to form a double zigzag for Minor 2.

3.  If the market is in the second zigzag pattern, then today is likely the "third of a third" of merely wave (a) of that zigzag pattern.  Therefore near term we are attempting to count our way to the top of wave (a) of the final zigzag up.

After wave (a) up , we look for (b) wave pullback. Then 5 more waves would fulfill wave (c) to the top of Minor 2.

4. Time factor is a guess for the final zigzag. Form is what matters.  If [y] = [w] in time or less, then you can see Minor 2 will top prior to Christmas most likely.
A few weeks back I was fretting about Minor 2's time ratio. How can a market that took 5 months to decline correct in under only 1 month and be "done" since it only took 3+ weeks for the market to trace 3 waves up from 1074 - 1292?   It appears the concern about a time ratio between 1 down and 2 up being too short was well founded.

I mentioned that 1219-1220 SPX was a key resistance zone and that if the market can recapture this and use it as support, then a lurch toward 1300+ SPX may be in the cards.  Well it appears the market smashed through resistance with about as much force as can be dealt. I assume price action is telling us that this will hold as support for the near term thus setting the market up for another challenge toward 1292 resistance.

Hence, today's price action has forced us to flip Minor 2 back on as the primary count. Market internals from Friday and today do not fit into anything else at the moment.
Squiggle count.   Solidly today was a "third of a third" up. Key wave marker is yesterday's high of 1203. Any Breach of that to the downside signals a reversal.
Again, I'll show the weekly. Next big resistance is 1292 to 1300.  One good thing if the market gets higher than 1292, there will be a clear "three" wave pattern on the weekly which is preferable. Also the time ratio between 1 and 2 - or (1) and (2) if you prefer - will be ideal.


Tuesday, November 29, 2011

Elliott Wave Update ~ 29 November 2011

Once again, from a squiggle perspective, there are three waves from the recent 1158 low.  So we have a minimum wave structure for ii of (iii) of [i] of 3 down in place.

Yet today's price action can be viewed as somewhat constructive from the bull's point of view.

Today's high of 1203 was shy of our optimum retrace range of at least  1212-1223 SPX and specifically at least 1215 SPX and a covering of the Sunday the 20th of November night gap down on the e-minis.
Gap down area between the red lines:
This gap down area roughly corresponds with the long-term 1219 SPX resistance price. 1219 is the early 2010 high.  It was also the 2006 low.  I could extrapolate further back but you get the picture.

Additionally, approximately 1219-1220 is the dividing line of recent price action over the last many months. You can see this on the weekly.
Elliott wave theory is a theory of probability. If 1219 cannot be recaptured, the primary count calls for a severe sell-off Minute [i] of Minor wave 3 event eventually taking prices under 1074 SPX.

If 1219 SPX can be recaptured and held as support, then the alternate count is solidly in play where Minor 2 is not yet finished and perhaps a breach of 1300 SPX to the upside within 6 weeks or less.

That is how crucial I think this near term resistance marker is.

I wish there was a solid contrarian sentiment play that would point the way one way or another. But to be honest its a huge mixed bag.  There are overly bullish things occurring and there are overly bearish things occurring on varying time scales. The sentiment indicators are behaving like the price action: schizophrenic.

In the long run, schizo is probably a bearish trait. Eventually prices will follow through whether its next week or even early 2012.

I would absolutely love to see prices to the northside of 1260 SPX once again.  I never seem to get what I want though.


Monday, November 28, 2011

Elliott Wave Update ~ 28 November 2011

The day ended with the NYSE up volume ratio at 97%.  NASDAQ up volume ratio was 91%.  Yet advancers versus decliners was only 83% and 82% respectively.  And total volume of the market was nothing to write home about.

So despite the retarded upside opening, this bounce fits in perfectly with a subwave ii scenario. The ideal price target would be 1212-1223ish.

Then the market would again rollover and head lower under 1150SPX  and possible setup for a point of recognition in a "third of a third" (specifically  [3] of iii of (iii) of Minute [i] of Minor 3 down.

Overall count on the daily:
 The weekly shows the overall battle between support and resistance. 
Wilshire count:
SPY Count. Note the opening volume ratio, etc. It calmed down a bit by end of the day.
SPX Hourly:
SPX squiggles:

Sunday, November 27, 2011


[10:24AM: The count from a SPY standpoint.]
[10:17AM: This about sums up my market view long term at the moment.]
Red lines is the Sunday night gap down zone.
Longer range shows broken support

Primary count is the market is due a wave ii bounce which would correct the decline since pink (ii).

Friday, November 25, 2011

Elliott Wave Update ~ 25 November 2011

The bleeder bear wave from the 1260's continues.

We'll keep throwing up some squiggle count, but bleeder waves can prove tough to count.

The key is we can see each intra-day bounce is 3 waves, followed by a 5 wave impulse down. The day ended with the downtrend line again intact on the cash index and obeyed.
Best guess squiggle count.   There are certainly many other ways to count this down impulse.  The key, again, is to remember that the primary count is a very large sized wave 3 - either Minor or Intermediate sized - and that its exerting its force.

Downtrend line intact on the SPX....
But cleared on the all-hours e-minis. Pre-market price has held so far.
Recall the bleeder wave that formed Minor 1 of Intermediate (3) back in 2008.   This could be the same situation. Downtrend line was obeyed except for one instance it tried to escape and then got slapped hard back inside with a breakaway gap.
I do not think we have yet to have a "point of recognition" yet for this current bleeder wave. Its obeying the down trend line and its impulsing down in 5 wave moves.

[Update 2:56PM:]
And as far as that bleeder wave in 2008, I like the Wilshire count also:


The downtrend line exerts its force once again.
Impulsing down can be clearly seen even on the 1 minute scale. Corrective slop, then impulse.  The downtrend line is key for the near term.

Thursday, November 24, 2011

E-minis [Update 10:34AM]

[Update 10:34 AM: There is at least 9 waves down from pink (ii) and positive divergence still exits on the hourly.  Don't get too hung up on wave label degrees, as we can bump them up one wave degree later if it makes sense.  

If I ever change my long term count from Prechter's expanded flat scenario - hence P[3] - to what I have below, then all wave label degrees will be bumped up one notch and match EWI's at the moment (I am one degree lower since the 1370 high).  However my long term count would not be P[3] down where their's would be.  Mine would be Primary [A] down of Cycle wave y.  A zigzag taking the market to its deflationary collapse all the same as P[3].

The big problem I have with EWI's wave degree is that they are working toward the heart of P[3] down already (their count is Intermediate (3) of Primary [3] down) when it doesn't make sense yet!

Wednesday, November 23, 2011

Elliott Wave Update ~ 23 November 2011 [Update 7:21PM]

[Update 7:21PM: This squiggle count makes sense for now.  The day had to end at the low to fulfill this count's minimum ending price of an extended [5]. So for now, I like the count.

Also note the VIX was greatest at the bottom of proposed wave [3]. It can be said to be diverging.

But no one can deny the beautiful impulse patterns - ala 2008...

[Update 6:31PM: The squiggle count of the last 8 days of selling maybe be merely wave i of (iii) of [i] of 3 down. (Remember Minor 3 target is optimally 813 SPX! - we have a lot of squiggling to count)

Whenever I count squiggle impulses and what appears to be a solid wave three and four - in this case red sub waves [3] and [4] - and wave [5] comes but then extends some more, I think of an extended wave five.  This can also occur when there is no clearcut "third of a third" within the squiggle structure. So an extended wave i of (iii) is what we could have going on here.

Incidentally, the rebound target wave ii after an extended subwave [5] of i would be the previous wave (2) area of the extension within wave [5]. This is per Prechter and EWP.

Overall it counts well and an extended wave five is a "bleeder" stair-stepping type wave. So it makes sense here also considering nothing stands out as "wow" thats the middle of a third wave.
The DJIA I think marks where wave (ii) orthodox ending is:
The best wave count is that the market is working on producing the first subwave Minute [i] of Minor 3 down.

Minor 3 would unfold itself in 5 Minute-sized waves. Hence the wave count of Minute [i] of Minor 3.

Minor 3 down is projected to be a big wave. For instance, if Minor 3 expands by a normal 1.618 Fibonacci of Minor 1, the projected price low of Minor 3 is 813 SPX!

A strong guideline of wave threes - particularly one this size - is that the first subwave one will try and advance prices beyond the previous higher degree wave one.  This implies Minute [i] of 3 should ideally be below 1074 at least or somewhere in the vicinity.

The market "should" produce an oversold on Medium and Intermediate term time (multi week at least) and sentiment scales for Minute [i] of 3.  Currently the market is not near producing this yet as its just coming off its bullish rebound that Minor 2 produced!

So this also implies that we have a ways to go.

The daily shows this relationship along with necklines, trend-lines and base channels.

Tracking the subwaves of a Minute [i] of Minor 3 is likely to be tricky as it is proving so far. All we have to remember is the larger forces of negative trend is severe at a wave 3 level of this size.
The e-mini (all hours) downtrend line is well intact. Keep watching this is probably the easiest for now.


Red horizontal line is where Sunday night's gap down is. Futures are solidly under that support.  I was still kind of expecting a test of that area - now turned resistance.
But first things first. Futures need to break the downtrend line to have a chance at rallying back toward the resistance.  There is possibly some positive divergence developing on the MACD signal lines on the hourly.
At any rate good luck today!

Tuesday, November 22, 2011

Elliott Wave Update ~ 22 November 2011 [Update 5:09PM]

[Update 5:09PM: TLT may be in wave 5.  We have to assume that because the move from 3 to 4 down counts best as a 3 wave move. So we might speculate that a Minor 3 down in equities - at least part of it - for now, will result in further flight to bonds. U.S. bonds turn in the spotlight is not yet ripe I suppose.  Not until the final wave is in.
Not much to add today as far as wave counts.  Best guess squiggles.

Key point is that if this is Minute [i] of Minor 3 down, then we are likely drawing close to a third of a third wave selloff. I m still looking for a possible small bump up prior to that occurring. Perhaps tomorrow/Friday we get a holiday light volume bump, but thats just speculation based on looking for a small up wave ii of (iii) of [i] of 3.
Prices are slipping below support.
For those looking for an end-of-year surprise rally, the best wave pattern would be a Minor 2 double zigzag.  But prices need to hold near here and turn quickly and regain the initiative.
However sentiment and technicals do not really point to this scenario playing out.  For instance taking a look at one of my favorite Intermediate term sentiment charts via Sentiment Trader, sentiment was in fact much nearer a bullish extreme recently than bearish.

So downside prices are wide open and ripe for a Minor 3 down.
This Prophet chart shows major resistance line above. A retest of that resistance would fulfill our smaller subwave ii.


Monday, November 21, 2011

Elliott Wave Update ~ 21 November 2011

[Update 5:22PM: Trying to determine where a bounce wave ii of (iii) of [i] of 3 down is to occur is very useful indeed.  A wave ii of (iii) is an ideal spot to put on a leveraged short such as an ETF. If you can short in the wave ii of (iii) and you are correct in your counting, you will catch the iii of (iii) down.

From and e-mini standpoint, there is an unclosed gap down from Sunday night.  If there is a bounce in a wave ii of (iii) of [i] of 3 down as I have talked about tonight, I suspect this gap is a strong target.
I'm taking the position that we'll slap a 2 on the 1292 SPX high and call it Minor 2. From that perspective we attempt to map out sub-waves of Minor 3 down.

Each successive sub-wave one of Minor 3 should try and advance prices lower until we reach a "point of recognition". This proposed spot of intense selling is where wave iii of (iii) of [iii] of 3 unfolds. Its often a breakaway gap.

We are a long ways from that point but we will have "mini" recognition moments prior to that. For instance wave iii of (iii) of [i] of 3 should be its own "uh oh" selloff moment.  It is proposed that we are fast approaching wave iii of (iii) of [i] of 3.

The primary count best guess is today may have bottomed wave i of (iii) of [i] of 3. Therefore a bounce in wave ii (which may have been this afternoon's bounce) and then comes that first mini point of recognition as mentioned in the paragraph above.
From a SPY look:
Hourly chart:
As we zoom out to the daily, you can begin to see the proposed massive trendlines, head and shoulders patterns, base channels and support and such involved. We are talking big waves here.