Sunday, 6/30/13 update

The big question in the ES/SPX right now is whether the selling since the May 22nd top is over.  Since that top the ES has traced out a double zig-zag into last Monday's 1553.25 low.  The action since that low has been impulsive looking, and there were a couple of important momentum indicators that fired buy signals off that low.  So as of Friday morning the odds were for an IT low being in place as of Jun 24 and a rally sequence in progress.

However, EW allows for as many as three zig-zags in a multiple zig-zag sequence, so with two in place it is possible for another downstroke to occur and still conform to EW rules.  And the pattern Friday after the overnight highs has an impulse down followed by an odd looking corrective sequence and then another impulse down into the close, and that final impulse could just be the start of a wave. 
So it is possible that the ES put in an X wave high early Friday AM and has since tipped over into the third and final zig-zag in the series since the May 22nd top.

The 1st zig-zag, wave W, was 89.25 points and the 2nd zig-zag, wave Y, was 95.75 points, so pretty close in size.  Deducting those values from Friday's 1614.50 high print yields an initial target area of 1525.25 to 1518.75 for wave Z.

Tuesday, 6/25/13 update

Buy signal today on Al's Indicator with a drop yesterday below 1.00 and a spike up (sort of) today back over 1.00.  However, the price action today was not encouraging, sort of a stumble up, not exactly what may be expected if this is the start of a new bull market leg.  So some confirmation in the form of a strong rally would certainly help solidify the indication, meanwhile caution is warranted.

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The long term bear alternate on this site labels the bull market since the Mar '09 lows as an "X" wave taking the form of a double zig-zag.

As can be seen, the current status of this count has a 4th wave in progress or just completed with a 5th wave yet to occur into a final and major long term top.
 However, Pretzel published a count today which has a major long term top at the recent highs of May 22nd, and that got me thinking.  Upon review, the "X" wave alternate shown here, although different than Pretzel's count, can also be viewed as putting in that major top on May 22nd:

Why consider this at this point in time?  Yes there's been some selling since the May highs, but so far that selling hasn't cut all that deep in the scheme of things.  But what is significant is the reason for that selling:  sudden fear of liquidity contraction.  Anybody with half a brain has to realize that world financial markets have been floating on a sea of central bank supplied liquidity.  A bubble, no doubt. And if that bubble deflates it's 2008 all over again.  So the rumblings from the Fed Reserve, and maybe more significantly, the possible unraveling of credit excesses in China are exactly the triggers to be expected for another massive bear market to occur. 

Sunday, 6/23/13 update

Current preferred count is that the ES/SPX is tracing out a Minor W4 correction in a bull sequence that commenced at June, 2012 lows.

   
Minor W2 was a flat, so by the EW rule of alternation Minor W4 needs to be either a zig-zag or triangle style formation. The ES formed a 3 wave structure from the May 22 top with a sharp, quick sell off into a short term low on May 23 for the "a" leg, followed by a rally into May 28 for the "b" leg, after which prices traced out an ending diagonal "c" leg into the low of 1596.50 on Thursday Jun 6.  Following that the ES formed a flat correction against the downtrend which topped at a high of 1649.00 on Jun 19.  There have thus been two completed 3 wave structures since the all time highs of May 22nd, and these are labeled as Minute Wave "w" followed by a Minute Wave "x" of a developing double (and possibly triple) zig-zag.

The sell off since the Jun 19 top can be counted two different ways: either as a five wave impulse as in the above chart or as a three wave move as outlined in the alternate below.  The internal structure of the pattern favors the impulse interpretation, in which case the move (if complete) would represent Micro Wave "a" of the second zig-zag of a multiple zig-zag Minor W4.  A Micro Wave "b" corrective bounce will be followed by Micro Wave "c" into the final low for the pattern.

Alternate #1

In this alternate the ES is counted as having completed a triple zig-zag into the Friday low of 1570.50.  This is not viewed as the preferred count because the internal structure of the Jun 19 to Jun 21 sell off counts much better as a five wave impulse than a 3 wave move.

Alternate #2

Another possibility is that the entire structure from the May 22nd top is a sequence of Waves 1 & 2 of declining degree as in the above chart.  If this is the case, then Minor W4 has quite a bit of distance yet to travel in terms of both time and price.  The biggest problem with this count is the down move from May 28 into the low on Jun 6, which is clearly a diagonal type structure and thus much better counted as a "c" wave then a wave 1.  One other note on this alternate: if it is in fact correct, then the size of move it portends calls into question it's designation as a Minor W4.  This may force a re-examination of the labeling over the last year or two.

Saturday, 6/15/13 update

There are a myriad of possibilities at this juncture on the short term for the ES/SPX.  Actually, the same could be said for the intermediate term.  One thing relatively certain however is that the bear market from the May 22nd top is corrective in nature rather than the start of a long term bear market.  That statement of course probably makes it all but certain that we collapse from here.                     

Just kidding. 

Anyway, here are some EW possibilities, not necessarily in the order of probability:

4th wave in progress, double zig-zag developing with 1st of those zig-zags (wave "W') complete at the low of Jun 6, "X" wave currently unfolding in the form of a flat with A & B leg of flat done and C leg in progress, completion of "X" wave will usher in 2nd zig-zag (wave "Y") into eventual low for wave 4.  There is also the possibility that wave 4 will be a triple zig-zag (not shown).

 Same as above except that the "X" wave forms a triangle instead of a flat.

4th wave has formed a double zig-zag which was complete at the low of Jun 13, 5th wave now in progress.

4th wave in progress, it will be a triple zig-zag.  First two zig-zags are complete with 2nd "X" wave in progress, last zig-zag will ensue at completion of current "X" wave.


So the waters are pretty muddy here, and there's a fair chance that what eventually transpires will be none of the above.  From a trading standpoint, it's time to be extra cautious.

Saturday, 6/8/13 update

Nice rally in the ES/SPX off Thursday's lows which pretty much confirms the idea in Thursday's update:  a zig-zag correction into the lows with the "c" leg of that zig-zag forming an ending diagonal.

If Minor W4 is not yet complete, then the current rally off Thursday's low is either an "x" wave which will lead into another zig-zag selling sequence or it's the "b" wave of a developing triangle (not shown in chart) with the May 22 to Jun 6 zig-zag being the "a" wave.  If a triangle, then there is a wave c, d & e yet to come before Minor W4 concludes.  

There is another possibility, and that is that the May 22 top is not the conclusion of Minor W3 but is actually the top of Minute W3 of Minor W3, in which case the Thursday low would mark the termination of Minute W4 with Minute W5 thus currently in progress.  That would mean new all time highs in the short term to mark the top of Minor W3 before more selling in the form of Minor W4 ensues.

This view has some credibility for several reasons.  First, the rally from mid-April into the May 22 high has the steepest slope of any rally series since last November's lows, which evidences the type of acceleration that typifies 3rd waves in equity market sequences.  Second, the low of last Thursday occurred right at the lower trendline of the channel that delineates the bull market from last November.  Finally, the character of the bounce since that low is very clean and impulsive looking, more typical of a move with the trend then against it - i.e. it looks more like what would be expected of a 5th wave up rather than an "x" or "b" wave in a correction sequence.

A possible target in this eventuality would be ES 1695.00 where Minute W5 = Minute W1.

Thursday, 6/6/13 update

The idea for a "c" wave ending diagonal in a zig-zag correction off the May 22 highs is still alive, and that "c' wave may have seen it's conclusion at today's lows.  The bounce will be interesting, it's either just that - a bounce - which will be followed by more corrective activity or it's the start of a new leg in the bull market.  There is a way to count the action up from the mid-November lows as having only waves 1 through 3 complete with the recent selling being wave 4, which would dictate a 5th wave yet to occur.  Further, in that count the 2nd wave is a flat, so a zig-zag for the 4th wave would fit the requirements of EW.  Also, FWIW, the 2nd wave (Dec 12 - Dec 28) was 12 trading days, this correction marked it's 12th trading day today.

Prices today rebounded right at a trend line connecting the late December lows with the mid April low, narrowly avoiding a sell signal on my Intermediate Term trend indicator (in the "Market Trends" column to the right - the Daily is the IT trend indicator).  Fascinating.

Tuesday, 6/4/13 update

Corrective waves are difficult sequences to analyze using Elliott Wave, and the corrective pattern since the May 22nd highs has been typical in that regard.  Lots of choppiness, overlap and three wave patterns.  But the picture appears to be getting somewhat clearer.  Right now it can be counted as a five wave impulse into the low on May 23 for an "a" wave of a zig-zag, followed by a "b" wave into the high of May 28, with the "c" wave developing in the form of an ending diagonal since that time. 

As can be seen, if this count is correct then the "c" wave ending diagonal is in its very last stages.

Sunday, 6/2/13 update

Current preferred count has the ES/SPX completing a Minor W3 at the May 22nd highs with Minor W4 currently in progress.

Minor W2 was a flat, so by the EW rule of alternation Minor W4 needs to be either a zig-zag or triangle style formation.  There are several ways to view the progress of Minor W4 since the May 22 top.  The most obvious possibility is as shown in the chart above, with a series of 1st & 2nd waves of ever lower degree leading into a 3rd of a 3rd power drop such as showed up on Friday.  The whole structure, when complete, will form Minute Wave "a" of either a zig-zag or triangle Minor W4 and will be followed by a Minute Wave "b" rally sequence.

The other possibility is that the pattern from the low of May 23rd through the intraday high of Friday is a triangle formation that represents wave "b" of a zig-zag.  That zig-zag will eventually become the 1st leg of a double or triple zig-zag formation for Minor W4.  The triangle would thus be Micro Wave "b" with Micro Wave "c" of Minute Wave "w" now in progress.  The completion of Minute "w" will be followed by a Minute Wave "x" counter trend rally and then at least one more zig-zag type sell off.
A final possibility (not charted) is that the current sell off from the May 22nd top is the 1st leg in a developing triangle.  In that eventuality the low achieved by the current sequence would be the low point for Minor W4, after which Minor W4 will track sideways in a trading range fashion for a while before concluding. 

The long term alternate bear count is below (daily bars).  At this point, the short term possibilities are pretty much the same as in the preferred count.