Primary count has not changed. Wave [iv] of 3 of (5) appears to have indeed peaked. A deep retrace today but the 780 high held. Then a selloff and the market closed under 757 support.
Commentary:
I don’t have anything much new to add. Just a few updated charts. The NASDAQ was the leader down and its 5 minute chart was much purer in form so I opted to post that.
What will happen Friday? Well the waves are clearly pointed down. Not many support layers are left for the markets. The CPC was just outrageously low today with calls yet the market sold down….sooner or later this should rapidly reverse to the put side once people figure out this market is going lower before its going higher.
Fundamentally, the “numbers” are so freakin horrible that its like living in some kind of nightmare. I won’t bother to rehash anything here. I do very much pay attention to ’fundamentals” but I do not base these charts off them. I’m a wave guy. The waves move, the fundamentals always follow.
What gets me though is the fact that the market is still hanging up here in the mid-700′s. Its scary. And the call ratio and lack of fear in the VIX makes me wonder if all my counts of the subwaves are just a tad premature. They *look* correct and if the SPX goes below 738, then wave 3 of (5) will be longer than wave 1 of (5) which is to be expected as a minimum. A healthy 1.618 expansion ratio takes this wave 3 down to 652 SPX and it may very well go there on either an extended wave 5 of (5) or I have this wave 3 of (5) labeled prematurely and we haven’t yet seen all the subwaves unfold just yet. If the market is going to self-destruct, than this is near the spot where it could very well happen – because perhaps we are in just the middle portion of wave 3 of (5). I like 685 as the eventual market low. Its the average between a percentage drop and a point drop of wave (5) = wave (1). Its also a very good support shelf.
Once 741 breaks, it may accelerate faster than anyone can know. The longer term support charts are reaching back to the early 90′s. The reason 741 was support is that it was the best support. The next long term support is weaker and the market may eventually seek round number support at for instance 700. But I am getting ahead of myself. Lets see what happens Friday.
My point is, this is so very a dangerous market even for shorts. Wave theory only says we make new lows. We try and determine bytracking and counting the subwaves and piecing the puzzle together along with all the other TA signals.
http://bloomberg.com/apps/news?pid=20601087&sid=aPCwImB7U3Kg&refer=home
Well done. IMHO the failure to breakout higher after the I-H&S of the last 5 days (SPX 15) sure looks like a clear reversal pattern, or at least damaged the structure. Last day of the month (usually bullish), but my bets will be on “preliminary” GDP (8:30am) being worse than the “advance” number from last month of a negative 3.8%. Futures pretty flat right now. Pop, then drop after 8:30? Who knows. Luck to all.
Great charts. Thanks Dan.
sure looks bearish. As a matter of fact, almost everyone is convinced it will go down.
That’s my cue to go bulllish. Too many bears.
Look at crude. Here’s a chart to consider: http://stockcharts.com/h-sc/ui?s=$WTIC&id=p07079468967&def=N&a=130881585&listNum=1&cn=24
tomorrow this chart will be locked for the monthly. It’s got a doji for February. A reversal doji.
I think crude will go up now at least until the end of June. Take a look at USO:
http://stockcharts.com/h-sc/ui?s=USO&id=p03361791625&def=N&listNum=1
the last time it went up like this it went up 11 points. That would bring USO to 33.74 or more.
If crude goes up then the market will follow…. watch the birdie…..
hmm…..you are going to get your A$$ kicked if you are betting bullish in the next few days…… If you are bullish, just wait on the sidelines for a few days….that’s all…..you will be happy about how much money you saved.
685 is a not the low.
Let’s put opinions, gut feelings, hunches, beliefs, obvious truths (whenever one of my college Professors would use the word “obviously” as he was writing out an equation, I found it it seldom was) aside for the moment and look at this purely from the POV of Elliot Wave Principle. Since the title of Dan’s blog is “Elliot Wave, Trading Blog” I think that’s reasonable. What does EWP actually say about wave 5:
Q: Is there a rule that wave 5 must end in lower lows than wave 3?
A: No
Q: Is there a rule that wave 5 must retest the lows of wave 3?
A: No
Q: So what rules are there?
A: The only rule is that the fifth wave must comprise five waves. That’s it.
And, as you can see from Dan’s chart above, we put in five waves today from the [iv] top. So, there is no requirement as far as EWP is concerned that we put in a lower low. And with that in mind, Prechter’s surprising and disarming statement on Tue for EWI members to cover leveredged short positions wasn’t just the “shrewd” thing to do, as some have speculated. It was the wise and prudent thing to do. Because, technically, there is no more EWP ammo in this bear rifle.
Gasp! Heresy! No it isn’t. Note I didn’t say there was no more TA ammo in the bear rifle. I said there was no more EWP ammo in the bear rifle. Let’s go through the count.
1) We have, at the most, one minute wave [v],3,(5) left to complete 3,(5), and as noted above, there is nothing you can point to in EWP that can prove we did not complete minute wave [v],3,(5) today.
2) We have only two minor waves left to complete intermediate wave (5), namely, 4 & 5.
3) Again, there is nothing you can point to in EWP that can prove we did not put in the low with [3],3,(5). I repeat. Nothing.
Therefore, while this may taste like some unsavory gristle to still hungry bears, them are the facts.
Q.E.D.
Afterthought: If you want to base an argument that the market goes lower on technical analysis, that is perfectly acceptable–in fact, I have a few charts that illustrate this point myself (see the Social page). However, if you want to base your argument on EWP…uh uh. There is no “there” there and you are doing little more than gambling.
According to EWP wave 3 is never the shortest, so wave 3 of (5) will at least be as long as 1 of (5), that hasn’t happened yet, so I think we will put a new low very soon.
C’mon Smaragd. A proper Elliottician is rigorous in application of theory. Read what you just wrote. B does not follow from A. If all birds walk on two legs, everything that walks on two legs is not a bird!
Sorry Smaragd, that sounded a little tutelary. My apologies. You’re probably right that we will go lower. I got carried away.
Farsighted. remember this …as it is very important… it does not matter how you come to your conclusion of being bullish. it matters what conclusion you come too. watching 3 videos tonight. 2 bullish commentators and one bearish. hard to take a poll but the CPC will tell you the story. yesterday the CPC was exactly 50/50. im bearish not because others are bullish. my charts say we go down.
look at your charts and take your position. dont try and guess what people are thinking overall just from this board. this board is overly bearish and im comfortable with that because indicators say sentiment is neutral.
good luck trading! im 100% short.. including gold.
I dont’ have any positions, because there is a chance no clear signal yet.
Daneric. Is it possible that what you market as a top is A and we are now in B (we also test the top line of the previous channel)? So next wave should be C up. Just a suggestion. And the reason I’m not long or short.
Dan, I found in ‘Statistical Analysis of Wave Three Ratios’, “less than 2% of the time, Wave 3 less than Wave 1″. Does this matter? Seems like we could be in a ’2%’ oddball moment. lol
And why don’t you label your Blue wave 2 877.86, instead of yours, Kenny’s, and Shanky’s spot of 875.01?
Just curious….thx
For any one that is interested in earning money with those crazy swings:
It is a slight modification from straddle approach:
- try to buy puts and calls ITM.
- no risk, as long as the stock have crazy swings, like financials for example
- buy the Options when their Delta are almost equal.
- make some math in order to force an equalization in price. I mean:
Number Calls X Price Call X (1 + Delta Call) =Number Puts X Price Put X (1 + Delta Put)
The logic is to equal the prices because you are expecting a Delta variation.
The approach is much better when Options are about to expire. I mean, like 02/03 weeks before the expiration, where delta runs much faster.
make sure you go to SOCIAL and check out all of the charts and blog posts. the analysis may spot something you miss and that will help keep you in or out of the market depending on your comfort level.
one important thing to note: this market has experienced great end of month rallies in the past . however, last month this was switched up and then we rallied pre opex. diving at the end of the month made the put action very heavy last month and then we rallied and held into opex week. picking a spot when everyone is so extremely bearish and buying calls may pay handsomely if we have a strong decline.
will we revert back to the old pattern? or repeat last months. if we start heading hard to the down side now, im selling my APRIL IWM PUTS … buying MARCH IWM CALLS for a 30% retrace…. that’s if we can come to a conclusion on the bottom of this predicted wave.
GBT may have a point. Prechter may be anticipating a truncated fifth intermediate wave. On page 35 of “Elliott Wave Principle”, Prechter writes, “A truncation often occurs following a particularly strong third wave.” Truncation occurs when the fifth wave does not move beyond the end of the third wave.
The example he uses to illustrate this on page 36, is from October 1962 and the waves look just like what’s happening now. The similarity is freaky.
He also says that,”A truncation can usually be verified by noting that the presumed fifth wave contains the necessary five subwaves,”
Unfortunately for GBT’s view, today’s low was could not have been part of a truncated fifth because it was part of a minor third. So, intermediate 5 still needs Minor 4 and 5 even if it might be truncated
If we end the week as it stands…the Dow Trans. predicts major downside. (Next major support of the Trans. is 1918!!!)
If the SPX ends the week lower than 768…That confirms the DT from 2002. Technical target = 360.
It’s scary to be short or long right now…3 trillion dollars are on the sidelines…when it gets re-invested…that’ll be a rally, until then…
(Most of this information is from the newsletter Citi Technicals from Pete…thanks, again for this treasure trove of ideas.)
I agree thx Pete I enjoy the Citi commentary!
And the IWM is ahead of the pack…good predictor imo.
I have some concern, like mentioned by a previous commentary:
-Oil is sharply up, and chart looks good.
-Gold chart suggest a correction more or less significant
-Vix is curiously well oriented announcing bullish market
all SP indicator looks saturated, normally we could expect to take some distance with BB in daily, before forcing it, no?
could all of this suggest we have reach a bottom or near (could fill the gap at 741), and then go up? how that blend with Elliot analysis?
Great charts! Thanks for sharing.
I agree, great charts, except for DJUSFN chart, I think that wave count on DJUSFN isn’t correct.
Excellent posts everyone!! Very constructive. A site worth visiting and posts well worth reading.
Excellent charts I´m a big fan of stocktock frpm Sweden!!