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Saturday, March 31, 2012

Saturday, 3/31/12 update

All three ES possibilities presented in the Thursday update are still in play. If the ES rallies strongly next week and moves sharply and significantly up through last weeks high at 1419.75 then Alternate #2 & #3 can be eliminated.

Alternate #1

Alternate #2

Alternate #3

However, for the very immediate future it looks like the direction will be down Sunday evening into Monday at the least. This is because the drop from the Friday morning high at 1406.25 into the mid morning low at 1395.75 as well as the ensuing rally from there into Friday afternoon's high at 1406 are best counted as 3 wave moves, so the whole thing looks like waves "a" and "b" of a 3-3-5 flat type of structure. This would portend a 5 wave "c" leg in the immediate future that should bottom below the wave "a" low at 1395.75.

Supporting this thought is the recent behavior of the Vindicator Buy/Sell which is showing selling pressure ascendant over buying pressure by the end of the day Friday.

Thursday, March 29, 2012

Thursday, 3/29/12 update

Lots of possibilities here.

First is that we are in Minor W5 from the low at 1338.50 of Mar 6. This Minor W5 is the last leg of Intermediate W3 that started on Nov 25. Within Minor W5 we've seen a Minute W1 & W2 and now within Minute W3 we've seen Micro W1 & W2, with Micro W2 bottoming at today's low of 1386.25. As such we should see a strong move up from here in Micro W3 of Minute W3. Minor W5 (and thus Intermediate W3) has a preliminary target in the low 1500's.
There is also the possibility that Minor W5 is forming an ending diagonal and the move up from Mar 6 through Tuesday's high was the first a-b-c leg and the selling into today's low was the 2nd leg of that formation. Sorry, don't have a chart for that.

Second, it's possible that Minor W3 topped at the high of Mar 19 rather than in late Feb, and that Minor W4 has been in progress since that time and is forming an irregular flat. In that flat wave "a" bottomed on Mar 23 at 1380.50, wave "b" topped on Tues at 1419.75 and wave "c" is still in progress. In this case wave "c" and thus Minor W4 should bottom at or below the low of wave "a" at 1380.50. Minor W5 will follow and will also have a target in the low 1500's. One problem in this alternate is that the internal count for Minor W3 is awkward.

Finally, there is the possibility that Tuesday's high marked the top of Major Wave B of a flat structure dating back to last May. This would make it a very significant top. If this is the case, then the ES is in the very early stages of a bear market that will eventually lead lower than the low of ES 1068 of last October.

Saturday, March 24, 2012

Saturday, 3/24/12 update

There are two alternate Elliott counts currently being maintained for the ES:

Alternate #1



Alternate #2



At this point Alternate #2 is hanging by a thread and will most likely be eliminated next week. In Alternate #2 a very significant top is assumed to have been established with the 1408.00 high of last Monday. This would mark the peak of a B wave in a 3-3-5 flat dating back to the highs in this area of last May. A Major Wave C should thus now be in progress. As such it should generate a strong impulsive structure to the downside. Instead, to this point we've had a somewhat choppy and very corrective looking sell off characterized by lots of wave overlaps. Further, the ES came within a whisker of confirming an upside reversal at Friday's close. On the hourly chart it put in a positive divergence on the Dynamic Oscillator as well as the RSI, and closed right on the down trend line that delineates the sell off. A close above that down trend line will confirm a reversal.

A rally above ES 1418 will be the trigger that eliminates Alternate #2.

Thursday, March 22, 2012

Thursday, 3/22/12 update

Sell signal on ES last night 11:00 PM CDT. Minor W5 was done at the high of 1408 on Monday. Sold longs at that time, looking for a decent bounce before considering a short position.

Tuesday, March 20, 2012

Tuesday, 3/20/12 (late) update

Current count on ES - would require a Minute W3 high followed by a flat or triangle Minute W4 and final Minute W5 into top and end to Minor W5 rally from 1338.50 low of Mar 6.

Monday, March 19, 2012

Monday, 3/19/12 update

Continued rally means that Minor W5 is extending. Updated count on Minor W5 below. If correct, there is a Micro Wave 4 & 5 and Minute Wave 4 & 5 yet to occur, with Micro W4 currently in progress. Target of 1418 for a top.

Saturday, March 17, 2012

Saturday, 3/17/12 update

Upward march continues in the ES, although the Elliott count indicates a minor pullback (10 - 15 points) over the next couple of days.

Updated charts on the two alternates presented in Wednesday's post:

Alternate #1

Alternate #2

The US$ rally that looked so promising a few days ago may have just been a correction to an ongoing bear market. As of Friday it's extremely close to confirming a downside reversal. If so, bearish pressure on equities from that direction will be removed.

Wednesday, March 14, 2012

Wednesday, 3/14/12 update

Quite obviously the Minor W4 low in the ES was last Tuesday (Mar 6). So a Minor Wave 5 is in progress. Two alternates at this point:

Alternate #1
Alternate #2

This 5th wave looks like it has a bit farther to go. With that in mind, equities are pretty overbought on a medium term basis, also sentiment is at bullish extremes (see last nights post on the VIX) and the US$ continues to rally, so the nod has to go to Alternate #1. But keep in mind that saying: the market can stay irrational a lot longer than you can stay solvent.

Tuesday, March 13, 2012

Tuesday, 3/13/12 late update

Not a lot of comment necessary here. Top chart is the VIX, or "fear" index, monthly bars - measure of "uncertainty" premium in options. Bottom chart is SPX monthly. Notice yellow circles.

Tuesday, 3/13/12 update

Things are developing about as expected, although on a shorter time frame.

US$ still tracking up as well, eventually this should rain on the bull parade.

HOWEVER, equities are moving up with a little more authority than would be expected for a "B" wave, so the Elliott count above may wind up being completely wrong. If the ES pushes significantly past the 1377.25 top of last week then things will need to be re-evaluated. Meanwhile long is the place to be at the moment.

Saturday, March 10, 2012

Saturday, 3/10/12 update

Looks like Minor W3 of the run up from the Nov 25 low topped on Thur, Mar 1.
Minor W4 has been in progress since that Mar 1 top. A three leg move is apparent into the low of 1338.50 on Mar 6, that is being counted as Minute Wave "a". Minor W4 should be a flat or triangle to alternate with the zig-zag of Minor W2. A triangle has 5 legs of ever decreasing length and (typically) strength. The rally off the Mar 6 low has been fairly stout, so it looks more like a potential Minute Wave "b" of a developing flat, which is the way it's being counted at this point in time. If this view is correct, the ES should trace a three leg move from that Mar 6 low that pushes to the 1377 area to complete Minute "b". Five waves can be counted up from the Mar 6 low into Friday's high, so the ES should immediately see a one or two day minor correction followed by a run towards 1377 to complete those three legs. Minute "c" should follow with a more serious and sustained sell off than Minute "a" to complete Minor W4. A possible target for the low of Minor W4 is the .382 retrace of Minor W3 which is at 1307.75.

ES Hourly

ES Daily

Meanwhile the US$ continues to build steam in it's rally off it's Feb 29 low. This should have a bearish impact on equities, but not necessarily immediately.

DX Daily

Wednesday, March 7, 2012

Wednesday, 3/7/12 update

Buy signal in the ES today. Looks like the selling is over for now.

Yesterday's low is most probably the A wave of Minor Wave 4. Minor W4 needs to be a flat or triangle to alternate with the double zig-zag of Minor W2. If it's a flat then prices should rally back to the recent highs before rolling over into a deeper sell off that should carry prices below yesterday's low print. If it's a triangle, then the ES should generate 4 more alternating moves (including the current one) of ever decreasing length followed by a 5th wave rally.

Monday, March 5, 2012

Monday, 3/5/12 update

Sell signal on the ES today, need to see follow through.

Confirmation on the DX breakout today, but no follow through, so not there for sure.... yet.

Saturday, March 3, 2012

Saturday, 3/3/12 update

The SPX/ES has been in a slow upward grind in the last two weeks. The best current count has it in a Minute Wave 5 of a Minor Wave 3 rally that started on Dec 19. As a 5th wave of a rally that is in it's 3rd month and that has seen a price appreciation of around 15% in that space of time, and also with prices in the exact same area that turned the market south last May, it's no surprise that the market is struggling. The best way to count this wave is as an ending diagonal, with waves 1 thru 4 of that structure in place and the 5th and final wave itself nearing completion. Thus a top for Minor W3 finally appears to be close at hand.

Markets usually need a precipitating event to roll them over, and that event at this juncture could well be a major turn up in the value of the US$. The DX has broken above it's downtrend line on Friday, the 1st necessary step in a rally. Follow through and confirmation are yet to come. Equity values and the value of the US$ has tended to show an inverse correlation in recent years, so this could be the trigger for the bear in equities.