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Friday, May 31, 2013

Elliott Wave Update ~ 31 May 2013

The squiggle count suggests that a "third of a third" wave down is near.
On a monthly scale, the market is still overbought.
On a weekly scale:
USD.  Stealth long term bullish pattern.  Most of the pundits will definitely be caught off guard with a dollar that refuses to "die" despite the seemingly "fool-proof" case that it should collapse.
Its not the dollar that's worthless (yet). Its bonds.  Since we are a credit-based economy, credit must collapse first.  And the mass selling of bonds will be conducted in dollars, resulting in a great demand for cash (actual and digital).  Once the credit bubble bursts and bonds go bankrupt (as they must - the math dictates it), then we can talk about the worth of the dollar itself.

The 6 month yield also sports a potential long term turning bullish pattern.   Rising yields will wreak havoc on the extremely over-leveraged (world) banking system and massive interest-rate derivative market.  Additionally house prices, credit card debt, student loans - everything will become unserviceable fast.

E-minis


Thursday, May 30, 2013

Wednesday, May 29, 2013

Elliott Wave Update ~ 29 May 2013

Despite the recent correction, on a weekly basis the stock market is still in overbought territory.
Squiggles still supports that yesterday's high was a wave (ii)

E-minis


Thursday, May 23, 2013

Elliott Wave Update ~ 23 May 2013

Probably the most satisfying way to label the rise since 2009 is a double zigzag.  Each zigzag has its own channeling characteristics and each zigzag "kicked off" with a rare Zweig Breadth Thrust event. The entire rise - albeit a bitch to count - still is very satisfying as a large corrective event.  And a corrective event of this size means bottom line its all bullshit and ripe to come unglued in historic fashion.

And just look how total volume has dropped steadily since the market low in 2009. This is bearish.

Still, we are awaiting a solid break of the red ellipse to confirm a trend change.
The short term squiggle count suggests it may be nearing. However, the retrace for wave (ii) has only been 38% so far. Normal wave (ii)'s trace higher of course. So the EW form would look better for the bear case if there was some more retrace higher prior to any new low. However, the alt count works too. In either case, the rebound off of today's low has the form of a corrective wave and the selloff has the form of an impulsive wave. That is a good indicator so far of a trend change.
As an example of long-term extreme market sentiment I present a fresh study via Sentiment Trader.  The Rydex bull/bear ratio is showing an extreme bet on further upside.
UPDATE: I do like to use the Wilshire5000 for superior form and often channeling too. It however has not yet reached its upper channel line. So if the market still has some perkiness left in it, I'll be watching this chart closely for either a move toward the upper channel or a break of the ellipse containing prices.

E-minis


Tuesday, May 21, 2013

Monday, May 20, 2013

Friday, May 17, 2013

Elliott Wave Update ~ 17 May 2013

The charts that matter are probably the channel charts that have been posted as of late

E-minis


Thursday, May 16, 2013

Elliott Wave Update ~ 16 May 2013

For all practical purposes, the S&P 500 price has met the upper channel line. Price action over the next few days should be closely watched for either a final lunge up or a break of the red curve that has supported prices for the last year+.

If consistent selling occurs tomorrow on Friday (which is what the wave count supports), there would likely be a high number of "buying climaxes" triggered. Buying climaxes often cluster near major turning points.
Intermediate (C) counts complete and the form is very satisfying.
Squiggle count of Minor 5 of (C) also counts complete.
An example of extreme sentiment. The Hurlbert stock sentiment via Sentiment Trader:

E-minis


Wednesday, May 15, 2013

Elliott Wave Update ~ 15 May 2013

Why do we characterize the rally from the 2009 low as one giant historic corrective wave?  Because when all things are considered, form is what matters probably most. And the form since the 2009 low has taken the clear characteristics of a corrective wave. Specifically a zigzag, or a series of 2 or 3 zigzags.  For the sake of simplicity in this discussion we'll just go with single zigzag count.

Per EW guidelines a corrective wave zigzag (according to Elliott Wave Principle: Key to Market Behavior (Prechter/Frost) there is exists some simple guidelines:

* Wave C if often about the same length as wave A

* Wave B typically retraces 38 - 79% of wave A

* A line connecting the ends of waves A and C is often parallel to a line connecting the end of wave B and the start of wave A (Forecasting guideline: Wave C often ends upon reaching a line drawn from the end of wave A that is parallel to a line connecting the start of wave A and the end of wave B)

The last point is important because channeling (which is described in the paragraph above) gives us the form of the wave. And the form of the wave tells us if its likely corrective or impulsive.

Channeling in an impulse is different than a corrective wave.

An impulse pattern consists of 5 overall waves. What does EW guidelines tell us about an impulse pattern concerning channeling?

* Wave 5 often ends when meeting or slightly exceeding a line drawn from the end of wave 3 that is parallel to the line connecting the ends of wave 2 and 4 on either arithmetic or log scale.

What does it matter if the rally from 2009 is labeled impulsive or corrective?

1. Corrective implies that the rally is a correction to the main trend of next higher degree. Since the rally since 2009 low has been UP, therefore the HIGHER DEGREE trend - in which it is correcting - is DOWN. (social mood main trend is down at the higher degree). Hence, since this 4 year rally is being labeled a CYCLE degree rally, therefore the next higher degree trend is a SUPERCYCLE degree wave. This SUPERCYCLE  degree trend - wave (a) specifically  is labeled as a downward social trending wave.

2. Using channeling techniques can help us identify the major turning point.  In this case wave [C] has nearly reached the "typical" turning point by touching the upper channel formed by the zigzag.
I never thought it probable that this rally since 2009 would have met this channeling guideline and hence prices had to move this high as a result. Yet traveled this high to form a channel it certainly did. Although prices are astronomical, the FORM of the wave fits perfectly with the idea of a cycle wave corrective rally all along. A touch on the upper channel line would be perfectly normal and a perfectly normal place for a major turning point.

By the way, the rise since November 2012 is getting an "exponential" look about it. Parabolic, and hence utterly unsustainable and susceptible to a most violent destruction.



E-minis


Tuesday, May 14, 2013

Elliott Wave Update ~ 14 May 2013

UPDATE: Update on the parabolic condition of the market. Showing both the Wilshire and S&P. Wilshire has superior channeling in non-log scale.

Wilshire count log scale:
Wilshire count non-log scale:
Equivalent SPX.
Everything "looks" right on the count below.
Adjusted squiggle count. Best guess is that minute [v] of Minor 5 is occurring.

E-minis


Monday, May 13, 2013

Elliott Wave Update ~ 13 May 2013

No change in the short term outlook or wave count.  Best count is that Minute [iii] of Minor 5 has peaked and prices are in some kind of sideways Minute [iv].
There was an interesting ED pattern that played out intraday.  An ED pattern at this stage would be labeled wave [v]. However, its suspect for now but I present it because the internal structures count really nice.
But like all triangles, we tend to label them too early. Perhaps this: