Thursday, July 30, 2009

Is A Reversal In Store?

What do you think? Pretty neat huh? Though this triangle was questionable in terms of EW rules, the OEX clearly displayed a triangle formation and indicated what to expect with SPX.

It appears we have finally reached the pinnacle of this long impulse up. That completion can be stated with a greater amount of certainty than at any other time in the past three weeks.

That being said, we will only get true confirmation that a reversal is in play if price does not break above 996.68, today's high, and when it breaks below 968.65.

Today's reversal lower may still be a possible correction before a turn higher. By the close, price retraced approximately 61.8% of the thrust out from this morning's low. The corrective structure looks like a zigzag as well.

Bottom line, the two levels above will confirm for us what we have.

Why 968.65 you may ask? If the 968.65 low was the beginning of a new impulse up and the rise from that low to the top at 996.68 were considered a wave 1, the correction which occurred today would be considered a wave 2.

EW Principle states that wave 2 cannot retrace beyond the start of wave 1. If the corrective wave retraces beyond the start of wave 1, in this case 968.65, then it cannot be considered a wave 2 and therefore the wave previous the corrective wave cannot be considered a wave 1.

Tomorrow we should see, if it is a new impulse down, a clear wave 3. Wave 3s are the easiest to spot. That will help us identify a new impulse. By the close today, it appears that wave 3 may be in progress.

Note that I have also labeled the corrective waves as abc as well. This is still a possible alternative count. We will confirm what type of structure we have in play surely enough tomorrow.


Wednesday, July 29, 2009

An Alternate Count for Wave IV

First off, I must make a correction to the following post:

I initially stated that I believed the Wave IV triangle was still in play even though there was a violation of the A-C line. Though this is still stated in EWP, what I failed to realize is that my Wave e in this post made a lower low than Wave c, which is a no-no when applied to contracting or barrier triangles in EW principle. Dan graciously corrected me on this.

However, this "no-no" rule would not apply if this structure was forming an expanding triangle. I am not so sure of that at this time.

What I do believe may possibly be a good alternate count is highlighted in the above charts.

Overall the formation looks like it may be an ascending/barrier triangle. If it is, it does not look fully developed yet in this state. It just looks a tad short and needs a little more sideways action. (I know. I know. Enough sideways action already!)

Using the good ole line chart again, clear subwaves are present. With this type of chart, I believe I see only Wave c completed with a Wave d in progress.

Notice how clean each a-b-c subwaves in red make up each a-b-c blue triangle subwaves. On the line chart you can just about see how each a-b-c red subwave adheres to the 5-3-5 pattern.

Again, this is only an alternate count but I will be prepared if we are surprised over the next two days if this current thrust is not the beginning of the final push to complete minute v.

Though SPX does not appear to have a valid triangle at this current count because of the wave e violation, other major indices do to include the OEX. This might be a telling sign.

Minute V Projection

My projection for minute v has not changed. There was a little adjustment with regards to minute v = minute i though. With minute v = minute i, my first target is approx 987. This coincides nicely with the thrust length out of the triangle, which also places minute v near 987.

Something else I find intriguing is what I posted earlier today on Dan's blog:

WaveTrader said...

" these fibonacci projections have not proven accurate for me yet but i will throw this out there. based on the structure so far from this am's low (970.13), there is a little cluster near the 988 level.

if projecting with fib truly correlates with EW, this level may have some significance for today. Heck, I think that also correlates with some other fibonacci relationships (wave v = i, kenny's projection and etc?)

i guess we will see.
July 29, 2009 10:19 AM "

At the time, the projection was made at approx 9:40 am est. I thought I was seeing a new impulse. Of course as the day progressed, the structure changed, headed lower and confused all (well, at least me).

Now, as things are a little clearer, that projection may prove to be a prescient one. We will see.

Fyi, I moved the label for minute iii to correctly reflect the structure.

And A Different Look Again.

Again, the markings were not changed from yesterday's chart. The only addition here is the price points for today's move. Notice again how form developed almost exactly as I traced it out with the red lines. Those lines are arbitrary but the lesson here is that form was intact to complete wave e and we finished with the thrust up to start minuette v to complete minute v.

Is It Still A Wave iv Triangle?

Look at today's pattern. I did not change anything from yesterday's chart ( except for the inclusion of the red abc labels and I moved where I thought subwave b should be for the triangle. These changes were made when I highlighted the line graph, which made things look a little clearer.

Notice when comparing both charts how the projection (my red lines) for wave e almost played out to a tee? As choppy as the waves were today and the numerous questions about the pattern, I will have to say my triangle count for wave iv is still in play.

We even had a falling wedge/contracting triangle breakout at the close. This lines up well with the conclusion of wave e of the triangle with the final thrust up to complete minute v.

In fact, in EW Principle, pg 49 on triangles, states that "Wave E can undershoot or overshoot the A-C line, and in fact, our experience tells us that it happens more often than not."

I honestly was concerned when price for what I believed to be wave e violated the A-C line but now find solace in this statement from the book.

What an interesting day it has been.

Tuesday, July 28, 2009

Another Look

Here is another way to look at the potential triangle as it plays out. I used a line chart and this helps smooth out the mess that has transpired over the past few days. The subwaves become much clearer.

Each triangle subwave should consist of a 3 subwave structure. So the triangle should have a total of 5 (a-b-c-d-e) three subwave (3-3-3-3-3) structures.

Notice that you can clearly see the 5-3-5 pattern (for most) for each a-b-c (in red) within each triangle subwave.

I have adjusted my triangle 'b' wave and 'c' because of this view.

Minute V Completion At Last?

I had to make an adjustment to my previous triangle labels.

I didn't think wave c was quite right. Based on the action today, what I thought was the thrust wave after wave e did not act the way a thrust wave should. Typically, the final thrust would be just that, it would have broken out and up through the upper trend line. The wave we saw today near the close was very slow and hesitant, not typical of a thrust.

I am going to label this as a wave 'd' in progress, however, tomorrow's action could very well remove that if it happens to thrust out at the open. I am guessing this will not be the case.

What I believe will happen is wave 'd' should complete, just within the upper trend line, a reversal will occur and develop wave 'e'. Wave 'e' should fall to within the lower trend line. Once there, we should expect our thrust wave and complete minuette 'v' of minute 'v'.

I have placed some targets based on expected thrust lengths for triangles and on typical EW wave relationships (in this case wave v = wave i). Both targets are within 2 points of one another, pretty darn close.

Let's see what happens in the next day or two.

Monday, July 27, 2009

Minuette Wave IV Triangle

As I mentioned in Dan's blog earlier in the morning, this alternative count appeared to be valid as well. Given the action into the close, I will have to change this to my primary count.

WaveTrader said...

" and as the morning has progressed, i do see an addtl count:
this morning's high may only be the top of minuette iii of minute v. what has transpired since this am's high is minuette iv (forming a triangle) of minute v.
so in the end:

a break above 982.49 will confirm that

or a break below 965.95 confirms minute v was in at 982.49"
July 27, 2009 12:42 PM

An alternative to this would be a flat structure beginning at the 98.40 high. But for now, my primary count is a triangle minuette iv in progress with a minuette v due sometime tomorrow.

My Near Term Count for 10:30 PST

Minute V Appears To Be Complete

As of this posting, I have minute V complete at 98.40 for SPY and 982.49 for SPX. A new 5 wave substructure appears to be playing out to the downside.

The following are possible retracement levels (rounded) for the entire 5 wave impulse from 7/8 to today's high:

38% = 94
50% = 93
61.8% = 91

Friday, July 24, 2009

My Interpretation as of 9:15 PST

Minute V Is Complete

I believe I can finally say that minute v is in. What should have been an abc correction to complete minute iv has failed to follow thru and as of this posting it a appears a new 5 wave structure is making it's way down.

I have posted a chart of the SPY with the new labels. We will see now how low we can go.

Thursday, July 23, 2009

Where Are We Headed?

Well it looks like the market pulled a fast one on us today. My count has been updated and I believe that we may have finally arrived at minute v.

Microsoft, Amazon and American Express are all trading lower (disappointing earnings/revenue/etc) after hours as of this writing. This should affect the market tomorrow and may be the catalyst for a cool down from this monstrous run up and sets us up for wave 'b'.

We ended the day with what appears to be an expanded flat with Wave 'c' in progress. However, this potentially may be the reversal that sends us lower in a 5 wave impulse.

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Wednesday, July 22, 2009

Tuesday, July 21, 2009

A Revised Count

One could also argue that minute iv was completed where I have (i) or a labeled and minute v was working it's way higher.

We won't bother with that at this time until (ii) or b clearly breaks 956. At this time, with the market action after hours, we may get a little spurt higher to set up either a flat or an expanded flat.

This can all change at the open tomorrow morning.

An Impulse Down?

So far, wave iv is flirting with a possibly wave i overlap. It hasn't happened yet. If it does, this impulse will be invalidated.

Thursday, July 16, 2009

Is Minute Wave iii Complete?

By my count, I have minute wave iii complete. I am expecting as my preferred count minute wave iv to retrace this entire move up from the 869 low.

The question now is how far will it retrace?? I would suspect a nice short position could be taken with a stop of 945. Especially if Dr Doom is now bullish.

Let us see what the market has to offer tomorrow.

Finishing Up Minuette Wave iv

Minute Wave iii Not Quite Complete

By my count, minute wave iii is not quite complete. It appears a minuette wave iv is tracing out a possible double zz. Once that is complete, minuette wave v completes and with that minute wave iii.

Wednesday, July 15, 2009

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One Large Flat??

One does not want to stretch the imagination but must always look for the alternatives (glass half full right?). Can a larger flat be developing?

As it stands right now halfway through the trading day, SPX has reached a pinnacle (at least for the time being).

On the 60 min chart, I count two sets of 3 subwaves. One for wave 'a' (931.92-869.32) and wave 'b' (869.32 to present). Currently wave 'b' has retraced 90% of 'a', which at this time qualifies it for a larger flat setup.

Of course one would only see (or like to see) this formation if one were to believe that the double ZZ starting from the 956 high is not quite yet complete.If this were to be a flat this would complete the double ZZ and take us back to approximately SPX 860.

With the formation of wave 'b', does this form the 2nd right shoulder and keep the H & S formation in play?

Is it possible? I guess we will have to wait for the market to tell us.

Tuesday, July 14, 2009

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Just a few questions

Is 1.618 x wave 'a' enough?

Monday, July 13, 2009

A ZigZag With a Sub-Minuette Diagonal

It appears that wave 'c' of the zigzag is nearly complete and with that B2 blue. SPX was able to close above the neckline today. Will it be able to hold?

I have a feeling we may be heading lower from here once GS releases earnings tomorrow morning and begin wave C2 blue. Nothing has fundamentally changed for the market as a whole except for the fact that Meredith Whitney was bullish on GS short term. I think everyone just needed a reason to be bullish today.

Saturday, July 11, 2009

SPX- The Preferred Count

Based on this interpretation I would have to say that this would be considered the best count(preferred count) with the triangle potential as one alternate.

What I have labeled here is a zigzag. I believe many others have this same view.

Adding the channel lines provides a look at where wave c may potentially end up. Wave c, according to Elliot Wave Principle Forecasting Guidlines, will touch the upper channel line that is parallel to the lower channel line that connects the beginning of wave a and end of wave b.

The Fibonacci relationship where c=a places wave c near 890. c=1.618xa=903

Based on the present structure, the channel lines and wave c's relationship to 'a', I would venture to guess that wave 'c' will strongly be attracted to 890 (+/- 5 pts).

Once this is complete, do we head lower or do we see a second zigzag for 'c' of B2? I say we go lower. The 888-890 level previously acted as support and was back tested once on 7/9 before it was slapped down. I guess we are trying for a second time. We shall see.


The one concern I do have that may affect this view is that of wave (ii) red of 'c'. In this view and my alternate view, wave (ii) red looks like a triangle. It is pretty choppy and at the 3 min and 1 min, it does look like a triangle.

Per EW Rules, wave 2 in an impulse (wave c always subdivides into an impulse or diagonal; EW rules for zigzags) always subdivides into a zigzag, flat or combination.

Per EW Guidelines, wave 2 is usually a zigzag or a zigzag combination.

So unless wave (ii) red is a combination, it violates the EW Rule for wave 2 and strays from the guidelines, which in turn may add weight to the alternate triangle view.

However, in the end, EW concedes that not all guidelines will be met. The structure that meets the largest number of guidelines should be considered the preferred count.

We will just have to see how the structure develops.

SPX Expanding Triangle?

One more view...

Friday, July 10, 2009