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Monday, July 13, 2020

Elliott Wave Update ~ 13 July 2020 [Update 10PM EST]

[UPDATE 10PM] Here is the primary count of the Wilshire as it stands today. It is proposed that today's peak is wave (2) high.  Since the primary  count is now a double zigzag, I follow the wave relationship convention of [w][x][y] as developed by Robert Prechter of EWI. (click my links to the left and become a free club member!)

I could just label it Minor A-B-C, X, A-B-C, Y but that wouldn't show the proper hierarchal relationship to wave (2).  Therefore we adjust wave degrees to show the relationship in a consistent way. So wave C June 8th peak becomes Minor wave W - which represents the first corrective zigzag.  Minor wave Y will now represent the second corrective zigzag.   The "connecting" wave is Minor wave X (the 1800 point DOW down day which was hard to interpret on the Wilshire as an impulse or corrective. We now must count it as a corrective [a]-[b]-[c] wave to X.

What's interesting is that wave Y itself consists of 2 zigzags. We cannot call this formation a triple zigzag because it skews the relationship and besides the first mini zigzag within wave Y did not take out the price high of June 8th. So we label wave Y internally also [w][x][y].

What's also nice is that even though we adjust the wave degree labeling, internally we haven't made an impulse a corrective or vice versa except for X wave which was always tricky.

Overall its a very neat pattern and count and its the proper way to label this structure if (2) holds!  All that talk in April about zigzags and I completely overlooked this potential outcome this past weekend! I knew the Wilshire would come close to taking out its June 8th peak I should have accounted for it ahead of time.

But yes, today was the "failed breakout" scenario and hard reversal day.  Let's see if the count holds up.
ORIGINAL POST
You kind of had that feeling it was going to be a weird day.

The counts. That's a potential bearish engulfing candle with a possible exhaustion gap up. And the financial news of the day? "DOW finishes marginally higher."
Parked at the red channel line on the weekly.
The SPX and Wilshire pierced its June 8th highs but could not hold. They sold off significantly after a good sized gap up. This price action has actually fractured the market even further with non-confirmation events. The DOW and NYSE has yet to take out their early June island tops let alone the June 8th peaks. So today can be considered a non-confirmation event that just piles on all the other non-confirmations and divergences occurring in the last 3 months.

This blog discussed the purposes of zigzags in corrective waves in early April.  The primary purpose is to retrace deep in price (it did). A secondary purpose is time. The Wilshire 5000 (and just about every other index) peaked at the June 8th high in a classic A-B-C zigzag. However the NASDAQ Composite was on a mission of its own to trace 5 waves to a new all-time high. Therefore the Wilshire 5000/SPX had to be held up decently in price during that entire time. Today the Wilshire/SPX made a run to try and overcome resistance and make its own attempt at a breakout above the June 8th high. It tried to form its own 5th wave.

Therefore if today counts as the top of (2) - (hey we can suppose yes?), we have a nice second zigzag structure for the Wilshire 5000 count that did not serve the purpose of more price, but served the purpose of more time. And a "rule" is that the second zigzag (proposed zigzag wave Y) would have to finish higher than the first (proposed zigzag wave W), which today it did.

What's really neat is that zigzag wave "Y" is itself consisting of two mini zigzags which adhere to the rules of double zigzags within wave Y!

Composite 2 hour with Wilshire count in bottom half showing the zigzags.
Daily Wilshire shows that formidable resistance is in this price area.  This is the zone where the DJIA sold off terribly in that 1800 point drop.  
Will post more in a bit.

Since the Wilshire did pierce the June 8th peak, we require a top alternate 5 wave count to challenge new highs waiting in the wings. Tomorrow is a key day and will have to hold above near where prices ended today.

Any price break of where "4" pivot is marked, is very, very bearish. Considering the Composite just did a 400+ point intraday drop and everything ended near the low, they'll have to pull the magic of elevating futures again and reverse the 1 day momentum swing in short order.

The pink box on wave 3 is such a similar area where reversal higher seemed very hard to do but it did it and then we had multiple breakouts upwards to "3" after that. If you think the market is going to new highs (or at least finally close that open gap down 5 month old wound), this is exactly where you would buy it with a tight stop at "4".  That's why I expect the e-minis to be on the move.

And that's also why if "4" pivot breaks, its likely to be a tsunami of selling. The effort to take and conquer the June peak may be abandoned in that event. And considering the NASDAQ may be exhausted, well, should be a fun week either way!
Here is the bigger look for the 5 waves to new high. This market is like the Terminator though...relentless, and the Robinhooders, NY FED prop desk are already eating up the e-minis afterhours like PACMAN.

Hey if its meant to be, then so be it. The market is always right.

This chart shows "4" on a trendline (this in log scale) and where prices ended today. Its all on the edge of tomorrow.
FB The shitty triangle near the top and then a price drop after peak with waning RSI. Amazing prices  considering they are being boycotted by the corporations that are responsible for any earnings.
Tesla got hammered and it looks impulsive down, but momentum can be hard to kill. Note the ALT (iv) count. As was stated yesterday, when things sell hard, everything is going to get hurt.
Apple. Again, these stocks look like their patterns may be "finished", which would match the idea of a Composite peak as shown in the counts above.
Amazon. Nice trendline hit!
And non log scale for effect.
GOLD. Possible small series of ones and twos up.
Proposed wave 5 of (5) of the Composite.  The best alternate is that today's peak was merely [i] of 5 since it appears a completed five wave impulse structure up from June 29th, that would be the next best count. 

But like the SPX/Wilshire, it would have to find support here and now and reverse up again. With so many high flying stocks that have very mature patterns or possibly completed patterns it'll be a tough slog considering  you just boomeranged down 400+ points in a couple of hours and finished near the lows. 

Imagine futures gaps up like 200 points, there might be some sellers who decide to get the heck out. They'll take that bounce and perhaps sell it very hard considering your in bubble land. Then the gap gets covered and the trickle of sellers today could become a stampede tomorrow. 

A perfect ending would be a breakaway gap down creating a lonely island cluster in the cloud. (Get it?)  We'll see.
The bulls are relentless. The daily CPCE again dropped lower today despite the selloff!

I added the 30 day Moving average to spice things up. Now we have the 3 day crossing higher than the 5. These little crosses that occur are like warning "triggers". At least that's what I was taught.
  
And the 30 day average has never been lower on this chart. I could have guessed that would happen. The 30 day is never supposed to reach the green line. Only lesser averages reach that spot as shown in the first chart even the 10 day MA is at the "extreme complacency" line. It's amazing considering the very elevated VIX still that bets have been so persistently one-sided.




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