Saturday, 2/25/12 update

The ES/SPX has been a little difficult as of late (what else is new?), but it appears fairly certain that a top of some sort is being put in place. But also and again as usual, there are a couple of ways to label the recent action.

Early this last week it looked like Minor W3 topped early Monday morning, if so then Minor W4 was in progress all week. In this case the multiple zig-zag into Thursday's low would be Minute Wave "a" of Minor 4 and the run up into Friday's high would be Minute W "b" as per the following:
If this is accurate, then Minute "c" is in progress and should result in a decent sell off over the coming week or so. One note: it is possible that Minute "b" has not concluded, it could see one more spike into the low 1370's before concluding in which case Minor W4 would be classified as an irregular flat.

There is another possibility here. The count could be labeled with Minute W5 of Minor W3 still in progress. In this alternate Minor W4 is counted as bottoming at the low of Feb 10 and Minor W5 is labeled as an ending diagonal in progress since that time:
In this scenario Micro Waves 1 thru 4 of Minute 5 are complete and Micro W5 is done or close to done.

From a trading standpoint their is no difference between the two possibilities for the coming week, in either scenario a sell off is expected. The difference lies down the road: in the 1st alternate one final rally representing Minor W5 is expected before a much deeper and more serious correction, in the 2nd alternate there would be an a-b-c sequence necessary before that Minor W5 conclusion and ensuing deep sell-off. Which will it be? Hard to say.

Thursday, 2/23/12

ES did form another zig-zag, so it is a triple zig-zag into today's low:


Updating yesterday's Minor W4 flat idea:


But the run up since today's low appears stronger than would be expected, which brings to mind the thought that Minute W5 of Minor W3 is still in progress. One way for it to resolve would be in the form of an ending diagonal:

Wednesday, 2/22/12 update

The pattern in the ES the last two days can best be counted as a double zig-zag. If the ES is in Minor Wave 4, then today's low could have marked the end of Minute Wave "a". There is a possibility of one more zig-zag, so Minute Wave "a" may have further to go.
Since Minor W2 was a triple zig zag, then Minor W4 should alternate with a three leg flat or a five leg triangle. The chart below assumes a flat with Minute Wave "a" done at today's low. In this scenario Minute "b" should travel back to Sunday night's high at 1369.50, Minute "c" will follow that re-test and drop down to the final low of Minor W4. Using today's low of 1353 a 2.618 multiple of Minute "a" would push Minute "c" to a low of 1326.25. This is right in the area of a .236 retrace of Minor W3 which is at 1328.50. Of course, it's quite early yet, so these projections are pretty speculative.

Also, please note that it's quite possible to see a triangle or some other type of complex formation form. A triangle would be a frustrating sideways grind, but the nice thing about them is they really clarify the possibilities once they're done - they always precede the last thrust in the longer term trend that contains them.

Tuesday, 2/21/12 update

Could it be? Could it be!? A top?




Requirements for a top are met from an Elliott standpoint in the ES as of this morning, and yesterday's high print of 1369.50 is almost right on the target of 1368.75.
BUT the pattern on today's downstroke was not clearly impulsive - if this is the start of a correction today's move down will have to be labeled as a leading diagonal. So more evidence is needed.

Thursday, 2/16/12 update

Updated preferred Elliott count has the ES still in Minor W3 with a Minute W4 flat type correction bottoming at last night's lows.


The Vindicator Buy/Sell continues to flop around.

Wednesday, 2/15/12 update

The ES/SPX has been whipsaw hell in the last few days, but it sure looks like a top is forming (or in place). The Vindicator Buy/Sell measures buying and selling pressure using advance/decline and volume statistics, and it's telling a very interesting story. Up until last Thursday the bulls were clearly in control as evidenced by buying pressure (green line in chart) staying solidly above selling pressure (red). However, starting last Thursday the buying and selling pressure began to oscillate, which is typical for this indicator at market turns. In this case it is evidence that the bulls have lost control and the market is ripe for a decline. As with any technical analysis tool the Vindicator is not foolproof, so it is possible for the bulls to regain there grip. If there is a sell-off, the big question is what severity it will have.


Another sell signal today, third one since last Thursday. The prior two were negated by little mini rallies, so it's been frustrating. However, the intraday (5 minute bars) ES chart of today's decline is showing a very clear 5 wave impulse down, so it looks encouraging. I'm planning a short ES move, but the ES/SPX is quite oversold at this point so I'm hoping to catch it on a bounce over the next day.

Tuesday, 2/14/12 2nd update

The Wave 4 flat idea from earlier today is blown out of the water with the pop up in the ES tonight. Back to the ideas presented in Monday's post, i.e. 5th wave in progress, target in the mid 1360's. Short position from earlier today was protected with a stop and reverse, so now net long 1/2 position.

Tuesday, 2/14/12 update

Looking at the Elliott counts after lunch I noticed that Minute Wave 5 and thus Minor Wave 3 can be better counted as complete at last Thursday's high than as still in progress - a nice little channel can be drawn around the move up from the Jan 30 low into that high. That channel is broken by the price action late last Thursday and into Friday. Further, the move down into the Friday low has three legs, and the move up from there into today's high can also be counted as a three. We may well have already seen the "a" and "b" legs of a 3-3-5 flat formation. Minor Wave 2 was a zig zag, so this idea fits in terms of alternation. If all this is correct, the ES is in the "c" leg of that correction. A 1st target would be the .236 retrace of Minor W3 at 1315.75.

One final note, a sell signal was issued by the Dynamic Oscillator system on the SPX earlier this PM and if the ES stays below 1342 for the next six minutes there will be a sell signal there as well. (currently 1:54 PM CST)

Monday, 2/13/12 update

The ES/SPX appears to be in a 5th wave of the rally off the lows of late Jan, and that move is itself a 5th wave of either Intermediate or Minor degree ( more on that in a bit). Buying pressure as measured by the Vindicator Buy/Sell has been visibly waning with a series of lower peaks since late January (buying pressure is represented by the green line in the chart) which supports the idea that a 5th wave has been in progress:


In fact, 5 waves can be counted in the move up off of Friday's lows, so it's entirely possible that a top of some significance was established at today's highs, but if so that will need confirmation which isn't yet evident.

Whether the ES/SPX is going to put in a Intermediate or Minor degree top is also an open question. The two pertinent alternate counts are as follows:

Intermediate degree

Minor degree

The Minor degree alternate seems more likely, the move up since the Dec 19 lows looks like a unit to me. Also, in the Intermediate degree alternate Minor Wave 4 did much less damage (34 vs 73 points) and was much quicker (3 days vs 8 days) than Minor W2. The difference is significant - if the ES/SPX is on the verge of a correction of Minor degree it will be much more shallow and short lived than an Intermediate degree sell off.

Tuesday, 2/7/12 update

The ES still looks to be in the 5th wave of the move up from the Dec 19 lows, but that 5th wave appears to be extending. A possible target for Minute Wave 5 (green numerals) is where it's length equals that of Minute W1. Minute Wave 1 traveled 68.50 points, adding that to the Minute W4 low at 1296.00 yields a target of 1364.50.

Saturday, 2/4/12 update

Pretty strong up day on Friday. What looked like a slow uneventful grind earlier in the week sure livened up. That old saying "never short a quiet market" was right on in this case.
The Minor W3 top that seemed apparent a week ago looks to be negated. There haven't been any sell offs of more than a day or two since the lows of Dec 19, and the ones that have occurred have been pretty shallow, so the most likely case is that Minor W3 is continuing to extend. Best guess right now is that the ES is in Minute W5 of Minor W3, so a top should be fairly close at hand. But caution is warranted, this thing could just keep chuggin'.