Tuesday 6/22/10 wrap up

Summer doldrums have been temporarily suspended.  Nice selling action today, but there's a distinct possibility that we'll move up for a while from here.  So far the drop from yesterday's highs is only 3 waves, and the complicating factor is that the 2nd counter trend wave looks very much like a triangle.  In Elliott rules a triangle is never a 2nd wave, it can only be a B wave or a 4th wave, in this case obviously it would be a B.

The A (green) leg of the sell off is ES 26.25 points, the C (green) leg is 26.25 points at ES 1086.50, the low today was 1089.50.  Pretty close to equal.  The alternate to this count would have wave d (black) actually as a subwave 1 with wave e (black) subwave 2 and subwave 3 probably complete at today's low.  Note that we stopped right at the lower channel line from the lows of 6/8.
Another thing of note here is that if we do rally from here up to and past yesterdays highs then in all likelihood the rally from 6/8 to yesterday was a three wave A-B-C.  This is because in Elliott waves 2 and 4 of a 5 wave sequence need to alternate, and the Wave "2 or B" (red) is a zig-zag as is the selloff yesterday and today. Of course if we continue selling off from here to below the lows of 6/8 then the rally from there is obviously an A-B-C.  One final option if we rally from here is that the market is putting in an extended 5 wave bull pattern, but that seems highly unlikely.

The Vindicator patterns lead me to lean bullish at this point.  Note the similarity in the Vindicator Buy/Sell and Stochastic between the low of 6/8 (gray shaded area on chart) and the current pattern.  Specifically, on 6/8 the Buy line bottomed which indicated short term bull capitulation and the V Stoch put in a nice bullish divergence.