Today was one of those days where you just stare at the chart and wonder what the heck went wrong. It’s the type of day where you think of all the time and effort that went into your counts only to have them rendered useless in one swift updraft of buying. One commenter called EWT useless after today’s move. How tempting it is to throw in the towel and agree that EWT is just too darn fallible.
Regardless of your opinion on this, admit it was interesting that exactly when the S&P violated the Minuette (iv) CANNOT CROSS line, the market exploded higher on strong volume. Looks like too many people were on one side of the trade and there was a mass exodus out of the short camp. I repositioned my trading account to a neutral state until I figured out what the heck was going on. When the market does something you don’t expect, you must get smaller and reevaluate the situation.
After some reflection, here are my thoughts. This is the type of post that gets readers annoyed and even angry. I cringe just hitting the Publish button because I know most people will say I’m ignoring the price action and simply using creativity to find a count that fits my stubborn outlook. If there was one day in the past 3 years that I have been tempted to turn bullish, it was today. And that is why I know it’s time to be more bearish than ever.
This count is borrowed from DanEric who is a stubborn Bear just like me. It shows Minute [i] finishing shy of its 1010 target, sporting an extended fifth wave. Sure, it’s not ideal, but it’s a valid wave count with no rule violations. According to Prechter, corrections after extended fifth waves usually complete near wave two of lesser degree. Well, that’s pretty much where we are now indicating Minute [ii] is just about done. This target lines up pretty well with the 50% retracement too.
Please note: This is a rough road map for the market movement I expect based on the rules of Elliot Wave Theory (EWT). There may be several valid counts at any given time, but I am only presenting what I consider the most likely count based on my own objective analysis.
I’ll add that it makes sense for the markets to rally ahead of the Labor Day holiday. It’s in the country’s interest to have consumers feeling good heading into the weekend. The better people feel about the economy, the more money they will spend. Wouldn’t expect any intense selling until the markets reopen after the holiday on Tuesday, but I’m sure Friday’s employment report will be interesting!
Craig – I appreciate your stance. I’m in your camp. Not only will the consumers spend more at the malls, but they are also buying stocks that the big boys are distributing before the crash. Jordan
thanks for sharing craig…i posted on the blog yesterday if a head and shoulders pattern would still be intact if we retracted to the 1095-1100 area to make the right shoulder… so it looks like your count supports the 1095 area as well… i do think we have another big pullback in sept, but question is will it be just back to retest 1065 or lower…i think the other thing to consider now is that many are taking positions in hopes for certain announcements..ie: tax extension, mortgage intervention and more stimulus..so we will see
I will restate it. EW is worthless. Spend time looking at other things.