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Thursday, January 31, 2013

Thursday, 1/31/13 update

We may have seen a very significant top in the ES this week with Wednesday's high print of 1506.00.
This site has maintained that the entire bull market from the March '09 lows is an "X" wave - basically an intermission in a very long term bear market.  In that context, the ES is viewed as forming a double zig-zag in the period since those Mar '09 lows, with the second of those zig-zags in progress since the Oct '11 lows.  Further, this second zig-zag is nearing completion, with waves A and B done and wave C forming an ending diagonal that is in it's 5th, and thus last, wave.

There is a significant confluence of factors at Wednesday's 1506 high.  First, a trendline connecting the wave 1 and wave 3 tops of the ending diagonal intersects Wednesday's high almost perfectly.  Second, a trendline drawn across the tops of the wave 5 highs also lands in that same vicinity on Wednesday.  Third, a fibonacci 1.618 multiple of Major Wave A of the current zig zag added to the low of Major Wave B yields a top for Major Wave C of 1505.50.  Fourth, a fibonacci .618 multiple of Primary Wave W, the 1st of the double zig-zags of Cycle Wave X, when added to the 1068.00 low marking the onset of Primary Wave Y yields a top for Primary Wave Y of 1505.50.

Sunday, January 27, 2013

Sunday, 1/27/13 update

Quote of the day: "I would not let a low VIX lull you into thinking there is no risk in the market.  The VIX measures the anticipated risks, not the unanticipated risks."  - Harry Merriken, Gateway Fund

Alternate #1

Long term - Daily bars

Short term - Hourly bars

Alternate #2

Long term - Daily bars

Short term - Hourly bars

Sunday, January 20, 2013

Sunday, 1/20/13 update

Go long or be wrong.  But for how long?

The ending diagonal EW count is still the favored viewpoint for the ES/SPX on this site.  The view of this count is presented as Alternate 1 below.  However, there is another way to develop an ending diagonal count that is presented as Alternate 2 below.  The primary difference between the two is that Alternate 2 sees a conclusion to the formation in very short order - sometime in the next two weeks to be specific.   Alternate 2 arose as a result of trying to fit the preferred ES count to the NYSE.  It doesn't work because wave 3 winds up being the shortest wave in the sequence, and that's a no-no under EW rules.

Alternate 1 has the ES grinding out new highs into a top sometime in early spring.  Under this view the ES is in Micro W3 of Minute W3 of the last leg of the ED, so there needs to be a Micro W4 & W5 followed by a Minute W4 & W5 before the final top.  


Long term - Daily bars

Short term - Hourly bars

Alternate 2 shows the ES to be in Micro W5 of Minute W5 of the last leg of the ED, so as mentioned earlier a major top is very close if this viewpoint is correct.  1505.00 is a possible target area for that top.
Long term - Daily bars

Short term - Hourly bars

Sunday, January 13, 2013

Sunday, 1/13/12 update

In the ES/SPX the intermediate term bull trend from mid-November continues to truck along.  The preferred count has this move labeled as a Minor Wave "c", with Minute W1 and W2 done and Minute W3 blasting off with the sharp rally from Dec 30 to Jan 4.

On the very short term Micro W1 of Minute W3 appears complete at the high of 1463.00 on Jan 4.  After the Jan 4 high the ES traced out a 3 wave move into a low of  1446.00 on Jan 8, which could be the extent of Micro W2.  However, that would be a very shallow retracement of Micro W1.  Also, the two day rally from the Jan 8 low was very choppy.  So it's possible that Micro W2 is still in progress and thus will deliver a deeper retracement of Micro W1 before the onset of Micro W3.


Sunday, January 6, 2013

Sunday, 1/6/13 update

The whole fiscal cliff circus led to what may be viewed as an "artificial" sell off in the last half of December.  In like manner the explosive rally last Wednesday upon the resolution of the fiscal cliff could also be viewed as "artificial".  Except that the mid-week rally confirmed and extended an intermediate term bull market that has been in progress since mid-November.  So for the time being the underlying impulse has to be viewed as bullish until proven differently. 

From an EW standpoint the sequence since mid-November is best counted as a Minute Wave 1 & 2, with Minute W3 now in progress.  Minute W1 was a sloppy affair that is labeled as ending with a high at ES 1438.75 on Dec 12, and Minute W2 is a flat type correction that bottomed on Friday, Dec 28 at 1382.25.  The explosive up move of mid-week fits nicely with what might be expected from a 3rd wave, so it is being labeled as Micro W1 of Minute W3.  There almost certainly will be a pull back early this coming week, but it should be of short duration as it would be Micro W2 of Minute W3.

The long term perspective is becoming important at this point in time.  The whole bull market since the March '09 lows appears much more corrective in nature than impulsive.  There is a long term alternate count possible for this structure that views the sequence as a series of waves 1 & 2 of ever declining degree.  That view, although allowable under EW rules, just doesn't fit well with the seemingly endless overlaps and choppiness of the long term pattern, so this alternate case has to be assigned a low probability.  But it is possible.
Which leaves this site's preferred long term count, which is that the whole series since March '09 is in fact a Cycle degree "X" wave which will lead into another severe LT bear market series upon its conclusion.  In that context, the ES/SPX appears to be in the late stages of the second zig-zag of a double zig-zag that has been formed since the March '09 lows.  In point of fact, this count has the market in the "C" leg of that second zig-zag, and further, it has the 5th wave of that "C" leg currently in progress.  So the message is that equities are getting closer and closer to what could be a very significant long term top.  Using fibonacci analysis likely targets for that top currently are in the ES 1535 to 1546 area and after that in the 1578 to 1594 area.

One final thing that I can't resist pointing out.  Ending diagonal counts have recently been popping up all over the place on various market analysis blogs.  This site has been carrying an ending diagonal count as a possible alternate for almost a year now.  So stay tuned.