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Monday, August 31, 2015

Elliott Wave Update ~ 31 August 2015

The top 2 wave counts are presented in the chart below.  Primary count has the market possibly in wave 2 up. However prices are still in the ""target" range of a Minute [iv] of Minor 1 down, hence the alternate count.

Thursday, August 27, 2015

Elliott Wave Update ~ 27 August 2015

This market has been producing some amazing swings intraday.  The current massive trading range is being dominated by High Frequency Trading machines. The HFT's stepped aside during the opening plunge of Monday but since a floor was found they have been ripping the market in massive point moves almost unlike anything seen before (except 2008).

Its a broken market.

But anecdotally, I find through my personal interactions with every day adult investors that they have not flinched barely at all. Almost universally, this downturn has not much bothered the typical 401K invested person who doesn't much take interest in their accounts. They are not in panic mode like most of the Chinese mom and pops have been of late.  In fact I have mostly heard laughter about having been ripped for an 8% 401K loss in a few days. Its weird. In any regard, no panic.

The market was sideways trending since 2014 in a tight range near the highs. That support broke. Prices plunged as a result and stops got crushed.  But my hunch is that most retail are blissfully still in the market.

My guess is that we are probably in a wave 2 up instead of a wave [iv] of 1 down. Regardless, the market is at the mercy of the HFT's. Underlying liquidity is quite suspect.  

Major Resistance is the key. And yet  prices are still quite a ways from upper resistance despite the massive and historic 2 day rally. Thats just how far the market had dropped.

Wednesday, August 26, 2015

Elliott Wave Update ~ 26 August 2015

Primary count is that the market has topped in cycle wave b. This count implies the wave structure since the 2009 low is a 3 wave structure which means its a corrective wave.  

Instead of showing you what may or may not be the next day's short term squiggles (primary count is that we are in a wave [iv] with eventual lower lows to come), lets dive into long-term probabilities. After all, if we are suggesting cycle b is confirmed over, then no matter how hard the bounce, the "top" would probably not be revisited for a generation or more (Think Japan and its top in 1989). Thats a profound thought which deserves our attention.

Elliott Wave Theory is a logical theory of probabilities based on wave structure. Lets explore these probabilities based on EW guidelines and rules.

We'll start with the Wilshire channel chart. The tight green channel line since that 2011 low has been smashed through. This tells us that the wave structure as labeled from 2011 is over. Simply put, the correction of the last week is too large to be part of the 4 year count from 2011. And as you can see, it counts nicely as complete including an ending diagonal triangle bearish wedge.
Weekly give you the larger perspective:
Below shows a complete count using the DJIA: Not only has the DJIA average smashed through its channel lines from the 2011 low, it has smashed through its channel line since the 2009 low proper.  However the chart is in non-log scale.  Channels can look different in log scale as you'll see a few charts down.
So what if the cycle b "top" is not the top?  Then we must have an alternate count for that probability.  

If the market makes a new all-time high, then we'll have to count the move from 2009 low as a 5 wave move impulse and cycle wave V, not cycle b. I have been showing since 2009 low that the structure as it stands is currently a 3 wave structure. Until this week, we have had one major correction since 2009.  However, if a new market high occurs, the long term count would change to a 5 wave structure since the 2009 low.

Here is how that might look on the DOW in log scale:

EW Theory is a theory of probabilities based on wave structure and how those structures relate to each other. The call is that the cycle b "top" is in. But nothing is certain. If new market highs are in store, then we'll have to account for that.  

There is a lot of evidence that the cycle b top has been set. For one thing you need to check out Bob Prechter's Elliott Wave International (EWI) and his latest EW Theorist newsletter just put out on August 19th prior to the 4 day decline. He brilliantly charted long-term Fibonacci time and price levels over a multi-decade wave structure that is so unique (and so far accurate) its worth the price to sign up.

All you have to do is click on my EWI links to the left and sign up as a FREE EWI member. I would then get a small commission if you sign up for any EWI product or service thereafter. I recommend the monthly EW Theorist (Written by Robert Prechter himself) and Financial Forecast (monthly) along with Short Term update (3 times a week). They also offer excellent newsletters geared toward intraday trading based on EW structures and other products including all overseas markets.   Check it out!

My final thought is this: Even if there was to be another move to all-time highs, the same subsequent result would likely occur: Total market collapse. All we'll be doing is pushing back the inevitable deflationary depression.

Tuesday, August 25, 2015

Elliott Wave Update ~ 25 August 2015

What was that saying yesterday? Things got out of hand again huh?

Monday, August 24, 2015

Elliott Wave Update ~ 24 August 2015

Well, that got out of hand quickly huh? The first print on Stockcharts was a down volume ratio pressure of 289:1 right after the open.   I think its a record. The day of the flash crash May 2010, there was less than half of that (from what I recall). The DJIA and Nasdaq came close to tripping circuits breakers at the open, but the computers kicked in. Perhaps they are programmed to buy at negative 1000 point drop.
I'm better off showing weekly charts today rather than daily, the move was extreme today.

It seems our ending diagonal triangle count was correct as market prices did in fact collapse rather quickly after its termination to beneath the start point.
Hows that for a line touch?

Friday, August 21, 2015

Elliott Wave Update ~ 21 August 2015

Market is short term oversold as TRIN ended the day at a high 2.92. But as Elliott Wave International likes to say, an oversold market can be prone to an outright crash. (Think 2010 "flash crash" so buyer beware.)

My guess is that we are in a wave three down of perhaps Minor size. Therefore the medium term decline would not yet be over until all the subwaves play out.

Lots of trendlines and support solidly broken.

Thursday, August 20, 2015

Elliott Wave Update ~ 20 August 2015

Every index seems to be aligning to the downside. Key pivot levels have been closed under by nearly every major index.  The SPX closed under the key 2040 support and it had been the strongest to hold up.  The DOW has closed beneath 17000 and lost some 1350+ points since its May 20th peak.  
Market breadth is also aligned to the downside. A lower low on breadth, there is not currently any positive divergence here.  
Gold is bouncing as the wave structure has called for

Wednesday, August 19, 2015

Monday, August 17, 2015

Elliott Wave Update ~ 17 August 2015

A closer look at proposed waves 3,4, and 5.  Remember this is an ending diagonal pattern therefore wave 5 is supposed to count [a]-[b]-[c] to peak from 4.

Wednesday, August 12, 2015

Elliott Wave Update ~ 12 August 2015

Since the S&P500 and Wilshire 5000 topped a while back, there has not been an impulsive move down. Therefore one has to respect that the market still wants to take a stab at a new high.
On both charts above, it would take a solid close beneath the wave 4 pivot prices in order to declare that the wave pattern was finished. Obviously that hasn't happened yet which is why we still think Minor 5 is still the primary count.

Another tell-tale sign is that if the indexes did finish in an ending diagonal triangle as proposed, then prices would have collapsed by now out of sheer exhaustion. Obviously they haven't just yet. Therefore we assume the pattern may not yet be complete.

With all that said, there is definite signs of deterioration within the stock market. The DJIA has now dropped more than 1200 points from its high. Once high-flying stocks are getting hammered. Credit spreads are starting to blow out. Divergences are everywhere if one cares to look. The underneath rot is certainly still there and evidence is piling up.

If the count above is correct and the market makes a stab at a new high, the prediction is this:

The market will collapse in a swift move to the downside once the pattern is completed. I ponder if there will be a slow deterioration as we have had over the last month. If the S&P broke above 2140, even briefly to complete an ending diagonal triangle pattern, then the subsequent price moves could very well be a historic collapse in a swift manner.

So bears have that scenario going for them.

Tuesday, August 11, 2015

Elliott Wave Update ~ 11 August 2015

Yesterday's ridiculous gap up has been neatly closed. Market still exhibits a contracting triangle pattern. Altered the [b] of 5 count slightly.

Monday, August 10, 2015

Elliott Wave Update ~ 10 August 2015

If the market is still tracing out its final wave 5, then today was likely a "kickoff" day for the final push. On Friday, it was noticed that a contracting triangle situation had developed. ANd indeed today thrusted upwards on strong up volume.

Friday, August 7, 2015

Elliott Wave Update ~ 7 August 2015

Same situation as yesterday.

Thursday, August 6, 2015

Elliott Wave Update ~ 6 August 2015

The Wilshire chart is slowly working toward 3 major supports: horizontal support, lower Primary channel line support, lower wedge trendline support. If they cannot hold, I would expect a good bit of market downside.
But unless or until that break of support happens we keep patiently counting. There is a legitimate contracting triangle on the same Wilshire index.

Wednesday, August 5, 2015