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Sunday, August 25, 2013

Sunday, 8/25/13 update

The question right now is whether the Aug 5 top did indeed mark the transition to a trend change to bearish for the intermediate term.  There appear to be 5 waves down from the Aug 5 top in the ES complete at the 1631.50 low after regular hours on Aug 21.  If so, then the current short term rally from that low is significant.  A continuation of the rally to new highs obviates the question, a failure and downturn below that 1631.50 low pretty much confirms a change in trend.
From a fundamental standpoint, the current talk of winding down the Fed liquidity machine is ominous.  Yes, corporations have recovered from the recession malaise to some extent, so there is that basis of support for equity prices.  But there is no doubt that the Fed money machine has pumped up financial markets to a large extent, and if that machine is turned off - uh oh.  So the background news certainly supports the bear case.

If the rally from the Aug 21 low is in fact corrective and destined to fail, then a likely target is ES 1677.00 where Micro Wave a (black letters) = Micro Wave b and where Minute W2 or b (green letters) will = .618 x Minute W1 or a.

There are several alternative IT counts here that are possible and that I am tracking, but they all have much lower probability IMO.  When charting EW I take an Occam's Razor ("the simplest answer is often correct") approach, to wit the most obvious EW count is probably the correct one.  So I'll address these alternates if they appear to increase in probability, meanwhile the above count is the most obvious.

Sunday, August 18, 2013

Sunday, 8/18/13 update

Looks very much like the Aug 5 top in the ES/SPX was in fact a significant high that marked the onset of an intermediate term change in trend to bearish.  Current count looks like this:

As is common however there is a possible alternate count:

In this alternate there are only 3 waves complete from the Jun 24 low (Minute Waves 1 - 3) and Minute W4 of the sequence is still in progress.  The Minute W4 action since the Minute W3 top has been an irregular flat which is close to the completion of it's 3rd and final leg, Micro Wave "c".  Following the low of that Micro Wave "c" the ES would rally one more time into a Minute W5 top.  This count, although possible, has a low probability for several reasons, the chief of those being that the Minute W4 in this case is severely out of proportion with Minute Waves 1 thru 3 of the move.  The alternate is eliminated with a print below the Minute W1 top at 1620.50.

Sunday, August 11, 2013

Sunday, 8/11/13 update

Very choppy market in the last few weeks in the ES/SPX with no real progress in either direction.  But, on balance, the evidence is that a significant top was made at ES 1705 last Monday.  All the indicators of an imminent top mentioned in the post of July 27 are still in place.  On top of those factors the EW now appears to have reached a conclusion of the run up from Jun 24 with the 1705.00 print of Aug 5, and the pattern since that time has only served to confirm that the top is in.  As can be seen, the pattern from the Aug 5 high into the Aug 7 low of ES 1680.50 is clearly a 5 wave impulse, and the pattern from that low into Friday's close is a choppy, overlapping corrective looking sequence.

So the preferred count at this point has 5 waves complete off the Jun 24 low into the Aug 5 high, with wave 1 of the move off that high bottoming on Aug 7 and a corrective bounce working it's way out since that low.

 Preferred count
There are a couple of ST alternates that should be considered:

Alternate #1

The 1st alternate is that the Minute W4 action since the Minute W3 top has been a running flat which only just terminated at the 1680.50 low of Aug 7.  In this scenario Minute W5 is in it's very earliest stages.  This alternate has to be counted as very low probability for the reason that running flats typically occur early in a trend rather than towards it's conclusion.  This is because the impetus for that type of correction is that the underlying trend is so strong that it skews the correction in the direction of that underlying trend.  If anything the bullish action of recent weeks can be characterized as weak, which mitigates against the possibility of a running flat to occur. 

Alternate #2

The 2nd alternate is that the short rally from the 1677.25 low of Jul 30 (end of the W4 triangle) into the 1705 top of Aug 5 is only the 1st leg of Minute W5, so the action since that top is wave 2 of the sequence with waves 3 through 5 yet to occur.  This also has a low probability IMO, but actually is more feasible than the running flat alternate.

So if a top is not in fact in place, it shouldn't be far away.

Saturday, August 3, 2013

Saturday, 8/3/13 update

On the road again so just a couple of ES charts