Elliott Wave Update ~ 2/12/09

By
Craig
– February 12, 2009Posted in: Elliot Wave Analysis, Intraday Commentary

Primary Count: Market indexes bottomed on a “D” wave today and reversed to begin its “E” wave back toward the 900 area.

Alternate Count: SPX continues to produce complex correctives prior to the plunge under 800 SPX.

Commentary: 

Intraday Waves:

The waves down since the recent 875 peak have not been true 5 wave structures down. They look like “threes” (ABC patterns) mostly 5-3-5 zig zags down and some complex flat patterns.   Based on this evidence and the hard reversal today which was accomplished on good volume, my primary count is back toward the huge triangle and today marked the end of the “D” wave.  The “control” is today’s 808 low on the SPX.  If that is taken out, then the D wave theory is weak.  

Triangle commentary:

I have recently posted a blog post on my social page the 1937/1938 triangle and even the 1987 triangle and the fact that they both had “E” waves back to the upper trendline.   The 1937/1938 pattern is very interesting. It follows the current market very well. 

Today had a very pronounced “hammer” candlestick on all the indexes.  Both the 1987 and 1938 triangle also appear to be pronounced hammers marking their “D” legs, however I cannot confirm this due to I don’t think the chart I provided shows proper opening prices, but it would make sense anyways. The next days also were not terribly bullish as far as shooting straight upwards and holding gains. That could happen tomorrow also. Could be some down draft along with bullish updraft.   So don’t expect an elevator ride to 900 if this is the case that this is an E wave. There is many resistance layers to travel through.

The VIX got hammered at the end of day. I suspect the long-standing gap of the VIX will be filled prior to wave 5 starting (if my triangle play is correct).  That would fulfill a “falling wedge” pattern nicely.

There is certainly a perverse bullishness and lack of true fear in the markets. I suspect a true wave 5 down to new lows will not happen until this bullishness and complacency completely exhausts itself. E waves are built on “hope”.  Right now the government is what the news media has focused on as this source of hope.  However government cannot change the underlying sentiment, they merely reflect the current moods. They react.   So if the underlying sentiment WANTS an E wave, then it will happen and the media will invent a reason for its happening and the government, being part of the social fabric and mood, will probably do its part in helping the market achieve its E wave .   It will, of course, all make sense.  

Wave patterns repeat for a reason.  And triangles of this size wouldn’t makes sense unless it had its E wave. Regardless, the markets are still clearly missing its 5th wave to new lows.  It needs time as the 1937/1938 pattern clearly shows as that market didn’t bottom until almost April 1st.

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About Craig

Stubborn Bear from Boston