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Wednesday, July 1, 2020

Elliott Wave Update ~ 1 July 2020

I was going to open the post with a lot of babbling (well, that's below this chart) but here is the count on the NYSE which, as has been pointed out, seems to be silently leading the way lower with its own valid Elliott Wave count that greatly diverges from the overall market.

Again, it diverged with the rest of the market today by not making that afternoon high.

Waves [i] and [ii] and now (i) and (ii) seem fully developed or nearly so.
The primary count (variation 1) for the Wilshire5000 is that wave [ii] is tracing wave (c) in either a flat pattern or a slightly upward flat pattern which is basically the same thing. This was one of the count options shown in last night's update.

A small market burst higher may finally close the VIX gap created at the peak island top. This would create our new Wilshire 5000 wave (c) of [ii] even if it comes up short in price it would be an acceptable flat pattern. But we would need that final burst higher. Otherwise see primary count (variation 2) chart further down the update.
The wave structure over the 3 days is an awesome structure.  Wave iii is nearly a perfect Fibonacci 1.618 x price length of wave i. There is alternation between corrective waves, and the channeling is excellent so far.

The market however is running on fumes.  If they can keep it together overnight, it has a chance to run up to our new wave [ii] peak.  If wave v makes a normal run where v = i, or even a lesser ratio, we should get our new wave [ii] peak.

Again it's probably dependent on how the market opens.  This squiggle count below suggests that a gap up open and run higher to peak would work well.  Anything other than that starts to break the very nice price channeling.
But as was mentioned, the market seems to be stretched thin and on shaky ground.  Market internals were very narrow (toward NASDAQ only) and as mentioned on Elliott Wave International on tonight's update (click my links to left and become a Free Club Member), 57.8% of stocks on the SPX closed lower than higher.

There is a perfect count in place if the market decides right then and here that its had enough. There are enough squiggles to consider the impulse over the last 3 days over.  It would count still as an expanded flat wave ii peak in that case. Actually, wave i and ii on the chart below should probably be bumped up to (i) and (ii) due to length of time and strength in price.  (This would match the NYSE count 1st chart of the post). But I'm too lazy to do that right now, its not terribly important. What matters is the wave structure no matter what wave degree its given at the moment.
I could write some more about the Minor 4 triangle situation  but I would be repeating myself from last night's post. All that is still in play. Read last night's post to see how the dynamics work.

In fact here is the updated Minor 4 triangle count. [d] has broken above the contracting triangle line.
Maybe the VIX needs a simple trendline strike.
I always hated counting the NASDAQ it simply doesn't count great. But we may have a classic Head and Shoulders. And yes, we have yet another non-confirmation event with the NASDAQ's closing high on an all-time record today.

A simple RSI double divergence is going on also.
Gold may be due for a wave (iii) of [iii] of 5 higher. That would stretch things upwards nicely. There are enough waves in place, however, wouldn't it look great to burst toward that upper trendline?
Oh and the banks. What have the banks done over the last 3 days of Wilshire 5000 rally? Oh yeah they managed not to completely fall apart.
CPCE data. Very bullish sentiment.
Check this VIX count. It counts as finished, at least for now. Note where the VIX "third of a third" on the long wave VIX (v) down occurs. It is right at the middle. All the subwaves appear to be there.

The VIX collapsed in price by 22.4% in 3 days.  It's also diverging again significantly.  It diverged during Minor wave B when (b) of B failed to make a higher high, the VIX had shrunk significantly compared to the A wave peak.  Then when (c) of B went to its low, the VIX didn't make a higher spike. It turned out to be bullish.

Now its diverging again. The VIX is lower in price than at the wave [ii] peak.  This could be signaling that the market will follow higher as what occurred in the B wave. However, this time the market is much more fractured than it was at the B wave low.  So its not necessarily a bullish thing this time.

The flipside is that sentiment is getting comfortable and is wholly unprepared for a strong market reversal.  Combined with the CPCE chart, these are actual actions of the market not guesses at sentiment. This is real money. People are betting big on continued market upside, and people are getting comfortable placing those bets because the strikes are starting to get closer together. Its 22% less frazzled in only 3 trading days. And we just had another .46 CPCE daily print. 

Yet the gap down is not even closed on the Wilshire5000 on the VIX chart.

(You can't see the gap because the way it prints on Stockcharts which I think is a conspiracy anyway but I digress.  Ok here is the conspiracy: When the Wilshire prints an open gap, its a trading target for the algo's. When the Wilshire doesn't print a gap, its not a target and the market doesn't have to close it. If anyone knows why the Wilshire prints like it does - at least on Stockcharts - , please email me).

I view it as bearish overall, but I'm probably biased.

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