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Tuesday, November 10, 2020

Elliott Wave Update ~ 10 November 2020

Primary count is that the market has peaked in wave 5.  There are other counts such as only wave 3 of (5) has peaked and waves 4 and 5 will take some further weeks/months to play out which could take the final high sometime in early 2021, probably around inauguration day. 

Looking at the long and medium term picture still supports strongly that the wave count is getting close to be finished regardless.

For instance look at the weekly. We have peak RSI at the expected Wave (3) - or you could label that ideally subwave 3 of (3) - and now wave (5) is finishing out weaker. So despite the 14% rally in a week or so, nothing has changed that situation.

In fact you can start to pick up a small divergence within wave (5) (green arrow). 
So in that regard the rally from the March low on the Daily sports a similar RSI profile that fits perfectly into the wave structure. This was always the biggest clue that another new high may be coming because the peak RSI doesn't often end at the ultimate wave five peaks.

Now this chart below is done in "line mode" which smooths out the turbulations (I made that word up) of the daily swings. In this mode you can visualize a completed impulse and the RSI profile matches the expected wave structure in the the peak occurred either at 3 or some subwave [iii] of 3.

The length of time afterwards should not be too long.  If you revisit the weekly RSI profile above you'll note the peak occurred beginning of 2018 for a wave structure that started in 2009, or roughly 9:3 in years.  9 years to the peak RSI within wave (3), and nearly 3 years since to finish out (4) and (5).

Therefore the timing of the peak RSI on the daily in early September in relation to Monday's peak seems about the same appropriate proportion in time. About 5 months to 2 1/2, roughly the same ratio as the weekly.

Therefore the conclusion is that Monday was a wave (5) high or, as per alts, we don't likely have too much time left for the final high to be put in place.  That's why a January peak would be stretching things if this RSI profile holds in place. The extreme of September would be hard to repeat.
Here is the wave count on the weekly which uses the same count as the daily just above. You'll note however that wave [iv] would overlap wave [i] which is a violation, therefore we shoehorn the count into something else. However all the "bumps" are there. Nine bumps up from the March lows. 9 = impulse.

So to resolve the above overlap we have to consider that Monday was actually wave 3 of (5) proper and that waves 4 and 5 will take a few weeks, 2 months at most to finish up. Therefore the count would look like this and likely 5 of (5) would peak on the blue trendline.
So in review, if the market has not peaked, its getting long in the tooth, both the rally from 2009 and the rally from March 2020. There are several alternate options as you can see. 

We can use the 90 Day CPCE moving average to support that fact. It keeps dipping lower. In this regard I would not be surprised if the 90 day low ultimately aligns with the market wave (5) peak. There is a lot of dumb money driving this and smart money tagging along. Sooner or later in a game of chicken, one or the other will bail. Or maybe they all get trapped.
And yesterday's daily - again extreme.
US Bonds will ultimately decide the fate of the markets and give me props here, the counts have been pretty decent.
10 year yield racing back to the channel.
30 year yield is at the channel again.

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