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Thursday, July 16, 2020

Elliott Wave Update ~ 16 July 2020

Yesterday we had 4 squiggle options for the Wilshire 5000. The first can be eliminated as the gap up count that didn't happen.  Today we are left with three.

1. The "It's Been Over Count". I actually kind of like this count. As was mentioned about the NASDAQ, the market may not be willing to announce loud and clear that it has peaked, it probably prefers to do it stealthily and steadily. There were likely a lot of eager buyers today no doubt just waiting for the gap down to be closed but it didn't quite make it.

Note that today traced a similar look to the June peak top area.
2. The next option(s) is that this is trying to be 5 waves and has almost completed the ending diagonal triangle in the Wilshire, (the SPX can be said to have met the minimum in that regard with its yesterday peak), so lets count it like that.  It has set itself up for a gap up and a break into the area it has been trying to reach since early June.  Today traced some sort of wave (b), it can count as a triangle or will finish tomorrow early.

This count proposes that exhaustion has set in and any lunge upwards tomorrow will be the market's final effort and prices will collapse in a dung heap of putrid whatever.
3. The last option is the most bullish. This supposes major "upside surprise" and that prices hold for a few days nullifying the ending diagonal triangle. This proposes prices make a run through the open February gap down and attempt to challenge the all-time in a spirited (but exhausted) "Dash to the Finish".
As usual the market will decide.

There is a mass meeting of trendlines, and potential channel lines.  It's zoomed in so you can see things better.  It has taken the market a few months to reach this point, but all these lines will be resolved or nullified sooner rather than later. The market is running out of sideways room.

Note that it only takes a 2% gap down to get underneath every one of them and that would be extremely bearish price action if it were to happen. That would likely unleash a ton of selling. The algorithms know where these things are.

A 3% gap down is really super bearish as it gets under the [iv] wave marker pivot.

VIX is also coming to a head. The "VIX 5 waves down theory" will be validated if we get a lower VIX low. This implies the market may have that one more lunge upwards.

VIX finally slipped beneath the long up trend line today.
This chart is not required to happen.  But if it does, we are ready. I have no idea what the VIX is going to do, but it slipped under today.
Haven't forgotten about the Composite by any means. I just don't have a solid backup count other than it is retracing wave [ii] that is already complete or will be soon.

The count can absorb a huge surge without a new peak....I guess. The nice thing is so far, it looks "corrective" up since its hard low.
All-sessions e-minis prior to A/H's. Still has a wedge. Now as was suggested last night, if this is a wedge in A/H's, and if it overthrows the top overnight and then is exhausted, prices may retreat hard by morning. I'm just spit balling here.

Something to definitely keep an eye on because remember, the SPX day session has met the minimum requirements of this wedge.
10 Year yields are a most interesting count. Near-zero yields would likely crush the banks even further.

What one should ponder is how the nearly quadrillion in derivatives (many of them based on interest rates) and how it would affect them. You can't tell me they have this all figured out. A major market disruption may very well blow the entire thing up.  The banks are trading below "book value" for a reason.

When you leverage "assets" upon leveraged "assets", it might not take much to topple it.

Prediction: Derivatives will become an issue again, a very large issue.
CPCE may have "triggered".  In theory, this is "smart money" (Goldman Sachs) loading their books overwhelming the "dumb money" (retail) and setting the market up for a big negative price move. How else do you think they never lose money on their prop desk? 

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