9/30/11

First, I need to punish myself for having made a dimwitted trading decision.  I figured we might have made a temporary bottom when we dipped below 1139.93 for the first time today and rallied - so I went long SSO expecting something on the order of a Minuette (ii).

It of course didn't happen.  I should have known better.  Because even though the RSI was improving, we were still stuck by that thick green line which is losing 15 points per TD and has shunned every top since 1195.86.  Until and unless that line is breached to the upside and retested, I shouldn't even be thinking about going long.

Figuring out the bottom channel line is trickier.  The thin green line is the channel parallel to the thick green top starting at 1169.54 - the Sept. 28 close overshoots that; lower it by about 5 points if you want to use that line.  The red line suggests an expanding wedge, and it crosses 1100 on Monday.  The lower blue line is the least bearish of several bearish options, which suggests a contracting triangle the apex of which is on October 8 at well below 1100.

The thick black line, which crosses 1180 Monday, will, I think, provide major resistance to any up move.  If it is breached, a bearish case is still technically intact up to the burgundy line but if that breaks it is probably Minor 2 / Intermediate (2) underway up to the upper 1200s, if not a full-blown bull market.

9/29/11

So, the market started the day by gapping up, then tanked, then rallied, closing up 10 points.  Hope you weren't long Netflix, as if you were, you got burned again - the last time NFLX saw the price it closed at today was early August of last year.  AAPL, GOOG, or CMG - the dividend-less bellwethers - were all down today, presenting a rather worrying non-confirmation with the SPX which was up.

A bit of a noisy chart today.  On the 10-minute, we have a lower low on higher RSI so the late-day rally made perfect sense; if the shown wave count is accurate, it might be a larger rally to close out the month.  I bought SMN in the early going for an intraday scalp, which succeeded but didn't give me as much profit as I was hoping for (I set my protective stop above the day's interim low). 

On the other hand, that "Submin v" really looks like 3 down - the subsequent wave is a drastic correction with overlap, but could in fact be a 4th wave of an ending diagonal (the turquoise lines show this).  In addition to this, we have the more bearish "1-2-1-2-1-2" count.  In part because (1) the larger trend is still down (remember, no new low on 30- and 60-minute higher RSI yet) and (2) there are superbear counts for this move that have not yet been invalidated, and (3) the end-of-quarter window dressing has been more analogous to a brick being thrown through a window, I opened a partial position in SH (single-short SPX).

The upper green line is from the 1195 top to what I call Submin iv (it could, however, be a 2nd wave in a 1-2-1-2).  It represents the top of this downward channel.  The bottom of the channel is unclear, which is why I have drawn two potential lines.  Note the slope of the channel, however - it loses about 15 SPX points a day, quite steep.

In terms of resistance levels, we are already just about at 38.2% retracement from the low, which lends further credence to a possible downswing.  1167 would be the 50% and 1174 the 61.8%.  The 78.6% retracement is 1183.67, which the black line (trendline down from the 1230 high to the 1195 high) crosses through tomorrow.  The cup and handle is still a possibility, but it is quite possible that the up move will simply be the wave (ii) retrace (analogous to the large C&H that took up much of June).

9/28/11

The market's action recently can be interpreted in innumerable ways, but as my previous count has yet to be invalidated or even yet rendered unlikely, I will stick with it.

Despite the fact that this count is more bearish than Yogi, I closed out shorts today.  Why?  For one thing, because I entered them at a bad position (basically, Monday at the close) and wanted to leave at least with a profit (which I did - about 1%), and for another thing, this graph could be interpreted as a bullish cup and handle, plus all the gaps have been filled.

However, the 30-minute and 60-minute charts still have no lower low (than 1114) on higher RSI; furthermore, the deep retracement is more conducive with a second wave than a fourth wave (and if it is a fourth wave, where was the second wave?)  Yes, it doesn't "look" like a third wave, but not all third waves look like the prototypical third wave.

More to the point, we are supposed to be having end-of-quarter window dressing right now.  If this - down 45 SPX points since 2 p.m. yesterday - is what passes for end-of-quarter window dressing....

Also, just as an interesting aside, I noticed that what I have labeled as Micro [1] touched the 5-minute 233-EMA from the top, and Micro [4] touched it from the bottom.  Moreover, the averages are turning short-term bearish again.

9/26/11

The market went up for the second day in a row.  For some reason, this action causes bulls to rush out of whatever pens they've been held in and dance around bearish blogs calling for new highs.

Yes, there have been breaches of trend lines, but if this is a second wave (in this case, Minute [ii] of 3) rather than a fourth wave, that is to be expected!  Not to mention we still had that gap to fill at 1166.76, which we are just a couple points away from closing.  On a linear scale, the 0.5 retracement of the wave down is at 1167.30.  If that breaks, we are looking at just shy of 1180 as the .618 retracement.

One challenge is figuring out from all the overlapping slop which part of the wave we're in.  One-minute MACD seems to support a consideration of wave (b) as happening this morning, and the subsequent action was wave (c) of which we are closed in Submin iii.  A back-test of the center red line, followed by one last wave up to finally fill the gap would not be out of the question and would fit with this wave count.  (Most of this could also happen in the futures, though...)

The critical thing to remember is that on the 30-minute and 60-minute charts, we still have yet to record a lower low than 1114 on higher RSI, and on the daily chart, we still have yet to record a lower low than the 1101 August 9 low on higher RSI.  If Pebblewriter's "2007 is 2011" is still valid, mid-March 2008, which was the Intermediate (1) of P[1/A/W] bottom, corresponds with early or mid-October 2011 if I'm not mistaken.

Notice also that the rally from 1114 has been obeying a channel line.  This afternoon's rally was simply a thrust to near its top.  It is worth pointing out that the top of the channel line intersects the upper pseudo-trend line tomorrow at the close....

An AAPL a Day Keeps the Doctor Away?

Let's suppose it's April 2003.  You've got about $400,000 saved up for retirement.  For some reason, you decide to put it all - your entire life savings - into AAPL stock, which is trading at about $13-$14 a share, ignoring the advice of your broker who is screaming "Diversify!" at you.  Let's say you manage to buy 30,000 shares exactly of it.

If you never touched your account after that, today you would have 60,000 shares (because of a stock split) of AAPL at $404.30 a share - more than $24 million, and that's down from the recent high.  The stock has increased more than 60-fold in value over the past 8 1/2 years, has the highest market capitalization in the entire market now, and makes up approximately 200% of the NASDAQ.

It has vexed bearish traders who keep getting burned on their shorts; it is the poster boy for permabulls who boldly proclaim that "it hasn't even begun to tap China [bubble] and emerging markets [mostly bubbles]".  By now, AAPL is practically a religion:  its announcements have been turned into divine revelation, its products have been deemed holy, and its management staff have been deified.

Now, admittedly, Elliott Wave works better for indices rather than individual stocks, but I have tried a large-scale analysis of AAPL:

The 20-year low in AAPL was the 3.19/share (well, per half-share at the time) at the start of 1998 - the heyday of Microsoft.  Arbitrarily I call the rise to the 2000 "tech bubble" high Primary [1] - it's not particularly important which wave label we use so long as we're consistent.  I could have called it a Micro or Supermillennial wave if I wanted to, but Primary seems appropriate given that we're talking of time scales on the order of a couple of years.

The question lies in whether or not the "Great Recession" decline in the share price in 2008 is Primary [4] or if it's merely part of Primary [3] (e.g. an Intermediate-degree decline).  Given that Primary [3] as I have it labeled represents a 30-fold increase in the share price resulting in a surge to over $100 billion in market capitalization, it would be absurd to consider that merely Intermediate (1) of P[3] - especially given that the move since 2009, which should otherwise be (3) of P[3], is a weaker move than the 2003-07 uptrend.  It could be merely 1 of (3) of P[3], but then you're still looking at a Minor 2 down that would probably drop the share price below $200/share before it sees $1000.

Nevertheless, the chart above clearly shows new highs on lesser and lesser RSI peaks on the weekly chart.  On the monthlies, AAPL's RSI peaked in 2007 and we have made new stock highs on lower monthly RSI in 2011, after having dropped below an RSI of 50.  This is conducive with a wave 5 of large scale.

The daily RSI is still conducive with AAPL making new highs in the coming days to weeks (the hourly RSI, however, says we might already be done), and I haven't tried to count the subwaves - but I would not be surprised if a bleak winter is in store for the bellwether.

Disclosure:  I have no positions, short or long-term, in AAPL and no intention of opening any within the next 72 hours.

9/22/11

The market went down today.

The challenge is in figuring out how to count most of today's action.  It looks like an ending diagonal, yes, but what would have to be wave [3] of the diagonal is the shortest of the down waves, and also appears to be a "three".  The first move up from the 1127.79 low (which I label Submin iii) is a "three", and the subsequent action to 1114.22 can only be described as a zigzag, running flat, and another zigzag.  It is therefore possible that the move is in fact a complex-correction B wave - perhaps aided by HFT algorithms suddenly turning to manic sell mode - but if so it's the most absurd B wave I've ever seen. 

Another possibility is that the move is in fact one or part of a series of 4-5-4-5s that are culminating, some earlier waves of which have .  If so, this may in fact be Minute [i] coming to its culmination, but at the very least is Minuette (i).  There is a gap to be filled at 1166.76.  (But if it is just Minuette (i), be afraid - you are talking about a 100-SPX-point move for Minuette (i) of [i] - which is part of the reason I'm thinking I may be a degree low on this chart.  My hopes and prayers go out to those with their life savings stuck in IRAs or 401(k) plans, particularly ones that don't allow you to be in cash or in bearish securities...)

The point is that the channel that the market has been in for a month or so has been breached, and that we now have a clear 5 waves down from wherever you consider the orthodox top.  While RSIs at small time scales suggest a near-term bounce, 30-minute RSI still suggests even further lows before a more substantive bounce (e.g. Minute [ii] of 3, or Minor 2/Intermediate (2) for those with the "this is wave 5 down" counts, which are technically still valid.)

I covered my SDS position in the pre-market for a sizable profit (though nowhere near as much as I would have made had I held on until midday), but probably will re-short if we get into the 1150s.  A 50% correction from today's low would approximate a gap fill (slightly less on a log scale, slightly more on a linear); a .618 would get us to 1178-79.  I'd find it hard to believe the market, particularly if it is indeed Minor 3 as I anticipate, would make a larger correction than that - it may just barely fill the gap and then proceed with Minute [iii]/Minuette (iii) down to well under 1100.  But it is possible.

9/21/11

Autumn (in the Northern Hemisphere) doesn't technically start until Friday, at which point we will reach the equinox and nighttime will become longer than daytime for six months*, but the market definitely decided it would make like the leaves on autumn trees today, and fall.

Notice that the immediate reaction to the long-awaited Fed announcement today was (1) to fall, and (2) to not fall as much as either later in the day, or yesterday into this morning (i.e. it's Micro [1] of iii on this chart).  At any rate, the reaction to the announcement was far more Prechterian than conventional.  Stocks fell.  The dollar rose to levels not seen since February.  Oil fell.  Gold fell.  Silver fell.  Even AAPL managed to fall.

At the beginning of an impulse wave, particularly one which for all intents and purposes has no downside invalidation, determining wave degree can be difficult.  (This is in part what screwed up Prechter in Cycle V up - the market could have theoretically gone up as far as it darn well wanted to.)  However, I believe Minute [i] of 3 will end at approximately ~1010-1040, about the same place a Minute [v] of 1 would probably end.  Why?  Because this would fool people, and it is the bottom of Intermediate (B) of P[donut].

We breached 1174, triggering my bear entry. There is still technically a potential bullish case for this as (iv) of [c] of 2 until 1160.67 is breached, but... yeah.  We actually hit the cash-equivalent of that level in the futures after hours, and 10-minute RSI doesn't look too bull-friendly.  Furthermore, we're already more than a .618 retracement (on linear or logarithmic scales!) from 1220 to 1136.

*...okay, because of atmospheric refraction and the fact that the sun is a disk rather than a point, it's actually a few days later than that, but... meh.

9/19/11 - No Robots Today

It baffles me that anytime the market rapidly goes up in the last hour of trading it MUST ALWAYS be the fault of the hedge fund algorithms, the EEEEVIL ROBOTS that are supposedly out to screw up ordinary technical analysis.  Especially when it fits into an EW pattern so well.  In fact, with just a slight modification of Friday's analysis - a modification rendered necessary by the open, not the close - it fits with my count quite well.

(The action in the futures complicates this somewhat, as they fell and now it overlaps my Submin i - this lends credence to my alternate count in which the up move was [C] of b.  I sold off my SDS in the premarket for a slight profit and am currently all cash, but I will short again at <1160 SPX).

This count calls for a move at least into the 1220s.  We created a new gap down which will not be filled until 1216.  The upper 1240s is still a potential , but if 5=1 we will not manage it.

The first downswing from the wave (iii) top is clearly five waves, with a near-total correction for its wave 2 and a truncated fifth.  In retrospect, I should not have labeled this wave "a" of a triangle, as what would have been the "c" and "e" waves were threes, and I don't think a 5-3-3-3-3 triangle is EW standard.

It is also possible that my Submin "b" of (iv) is actually a W-X-Y correction, with my [C]-[D]-[E] as the (A)-(B)-(C) of the [Y] wave.  This allows for the possibility of it actually being a wave 2, which plays into the case that is most immediately bearish, and is the case we might have to consider if the SPX futures drop below 1185.25 tonight, and especially if the 1174 cash-equivalent is breached.  This case has 1220 as the top of a W-X-Y Minor 2, and the sharp move up this afternoon was C of 4 at some degree (possibly [C] of iv of (i) of [i], but maybe even (C) of [4] of i of (i) of [i]).

No need to invoke algorithms or hypothetical manipulators here.

Bovine Thinking

Permabulls, obviously, believe this to be a correction in a bull market; were they not to, they would cease to be permabulls.  I respectfully disagree, but in the interest of fairness I will show what I think to be the most probable large-scale bull count.

REMINDER:  I AM STILL MEDIUM- TO LONG-TERM BEARISH AND DO NOT THINK THIS COUNT VERY LIKELY TO BE VALID AT ALL.  IT IS NOT MY PRIMARY, NOR SECONDARY, NOR TERTIARY COUNT.

The fundamental premise of this count is that Prechter's count, and by extension every large-scale count based off Prechter's, is off by one Cycle degree impulse - that the late 1930s was not in fact Cycle I and II but rather either a Primary wave of the Cycle bull or part of the Supercycle correction (Great Depression) itself.  In such a case, the secular bear of the '70s was Cycle II rather than Cycle IV, and the secular bull of the '80s-'90s was Cycle III rather than Cycle V.

If so, it is reasonable to think of the 2002 downturn, 2007 high, and 2008-9 crash as Primary [A], [B], and [C] of Cycle IV, with us now in the early stages of Cycle V.  The May high was either Intermediate (1) of Primary [1], or Primary [1] itself.  In such a case we are either in or just finished either Intermediate (2) or Primary [2].

If the former, it is likely we are done by now; we have had 3 waves down from the 1370 high (which I think must be the operative high in a bull-market scenario), and are now probably working on a leading-diagonal Minor 1, which will look a lot like a bearish Minor 4 (or Minute [iv]), though unlike the bear counts it has no limit on how high it can thrust above the diagonal channel in its [e] wave.

If the latter, which I think is the more likely of the superbull cases, the correction from 1370 is absurdly small for a P[2] wave down.  We did stop almost perfectly at the linear 38.2% retracement, but why would the market be thinking in terms of linear scales when we're talking about the impulse wave doubling the market?  Subtract 1370÷2 from 666 and you get a negative number (-19, to be exact).  Far more likely be it that it stop at 1040 - but if it goes down to 1040, it's 5 waves down.  In fact, it's effectively Hochberg's count, except Intermediate (A) of a bull-correction P[2] rather than Intermediate (1) of a bearish P[3].  Intermediate (C) could easily get down under 900 (.618 correction at 877.96 on log scale).

On the other hand, wouldn't it be just like a large-scale wave 2 to do that - then with all the permabears not taking profits under the expectation of downside to 665 or below, skyrocket in P[3] up?

Mind you, I don't subscribe to either of these two counts; I think the 1370 May 2 high was P[B] at best, P[2] at worst.  And if the "we're in Int. (A) of P[2] down" is true, it's going to look bearish for another few months to a year at least (actually, now that I think about it, this could be a viable wave count for a hyperinflationary scenario).  The trick is that technically, there is still a viable bull count until the 2009 low breaks, and there is still a viable bull count until 1370 (and probably 1576) breaks.

For one thing, the June '09 high of 956.23 - Minor 1 of (A) of [B/2/X] in the bear count and Minor 1 of (1) (or Intermediate (1) of P[1]) in the bull count gets close to the 233-day EMA, while the 1044.50 Feb. '10 low (insignificant in these bull counts, but Minor 4 of (A) in the bear counts) touches it from the other side.  Similarly, we touched the 233-EMA from the top side this past June, whereas we are just a little bit away from touching it from the bottom right now (it's currently at 1244.68 and probably will decrease slightly tomorrow).  And again, a target in the 1240s...

For another thing, daily RSI, MACD, and CCI as well as weekly CCI have yet to make a higher low with the index at a lower low.  To make matters worse, monthly CCI still has yet to make a higher low with the index at a lower low than the March 2009 low.

9/16/11

N.B.  Blogger appears to have changed image loading.  To zoom in on this image properly (if you're on a desktop/laptop), try right-clicking on it and clicking "Open Image in New Tab" or whatever the equivalent in your browser is.

The rally over the past four days looks simultaneously impulsive and corrective.  Which, if it is a [c] wave, makes perfect sense, as a [c] wave is both.

It seems fairly reasonable that 1136 was a low of significance.  I call it [b] of 2, some call it [d] of 4 (or (d) of [iv] of 1), some call it the end of the correction since May.

The SPX's moves today were the sort of messy slop that can only be associated with a 4th wave, very possibly Minuette (iv) itself.  Where I have the top of Minuette (iii) is just shy of a 1.618 extension of my Minuette (i) - had it hit 1222.12 it would have been a perfect extension.  The CCI peak at today's open, coupled with the fact that for the first time since this rally began we did not break the morning's highs in the afternoon, lends further credence to this morning's 1220 high being Minuette (iii).  Additionally, Subminuette iii of (iii) is a 2.618 extension of Submin i on this chart.

I'm not even going to bother counting subwaves; for the most part this rally as been largely algo-driven crap.  The Submin e of (iv) low I have here is 1210.65 (StockCharts evidently didn't deem it important enough to mention).  If wave (v) = (i) in length, the target is 1248.63... and there we go with 1248 again!  I will allow for the possibility that the market tries to soar higher than that and possibly has a last-hour skyrocketing to the point where even 1300 seems like it might be breached - but bull markets do not have 30 point up moves in an hour.  I am not banking on that.

9/14/11

Though the 1-2-1-2 count hasn't technically been invalidated yet (it's one or two points away from that), I don't see it likely at this juncture.  Therefore I am switching to my alternate (which bears similarity to "Doctor Jr." of Daneric's blog's count.

I believe now that we are currently in (iii) of [c] of Minor 2.  Wave (ii) traced out a running flat - unusual, but the count fits.  Yes, I have Minute [v] of 1 truncating.  It is three degrees down from P[3] if it is P[3], thus it need not "act like" P[3] - technically, only Intermediate (5) (and probably Minor 5 of (3)) must not truncate.

An alternative count is that the 1202.38 top is the top of (iii) itself rather than simply Submin i of (iii).  This technically allows for a wave (v) that can be longer than wave (iii), because wave (iii) is 39.65 points and wave (i) is shorter at 37.98 points.  This works well with a "double top" some have proposed; if we take the 1188.65 low as THE wave (iv) low, a 39.65 move up would yield 1228.3.

I don't think this is likely to happen; we still don't have a higher high with lower RSI on the 60-minute chart - but it could be met with a truncation.  On the other hand, if we suppose C = A in terms of price, then (using logarithmic lengths) this sets a target of about 1247ish.

The upper channel parallel to the 1121-1136 lows and tangent to the 1230.71 wave [a] high crosses this 1247-48 line on Wednesday, which happens to be a Fibonacci 21 days from the 1121 bottom.  It also happens to be a day on which Bernanke says stuff and/or the Fed makes announcements, but that's not particularly relevant.

Notice things I did not mention in this post until now:  options expiration, what Bernanke or the Fed might actually say, QE3, Obama, the 2012 election, HFT, algorithms, the banker elite, any of the various cabals the conspiracy theorists come up with, fundamentals, news out of Europe, what China may do, etc., etc.  There is a reason I did not mention any of these things.

I will be unable to trade for most of the trading day tomorrow, and may be unable to post tomorrow afternoon.  I do have a GTC order to buy SDS if the market should fall below the approximate equivalent of 1160 as if it goes down that far I expect it to fall further, below 1136.

9/13/11

The market is once again making every conceivable effort to thwart all wave counts.

There is a gap up at about 1185-1186 that ideally should be filled.  Additionally, if the move up from 1136.07 to 1174.05 was an A wave, C=0.618*A puts the top at 1184ish.

On the other hand, the permabulls are out in force, crying vehement denial.  "There is no reason to be bearish; there is no reason to be short; a Greece default is priced in already; Bernanke will save the markets with POMO; the PPT won't let it fall".  Meanwhile, CNBC is actually somewhat bearish - this might suggest we're in wave 2, likely finished [b] of 2 yesterday, and are now in [c] of 2.

Even if this is the case, however, there will need to be a (ii) of [c] of 2 pullback, and I don't think the one-hour one from yesterday afternoon is going to cut it.  Additionally, if you take into account futures action last night, it is reasonable to consider the one-hour pullback from yesterday afternoon Submin ii, with Micro [1] and [2] of iii taking place overnight (what here would be Micro [2] dipped well below what would be the Submin i high), Micro [3] the 1174 high, Micro [4] the 1160 low, Micro [5] ending Submin iii the 1176 high, and Submin iv either over at 1165 or still in progress.

Nine waves up, however, portends an impulse and thus further upside; indeed, it may be that if this gap is to be filled tomorrow, the near-term action MUST be bullish.  I put my bear count on the image, but that count hangs by a thread.

Weekend Marketball

This weekend the market once again left us in a state of ambiguity.  Given the ridiculous number of times it has done so, I am starting to lean toward this being some sort of 4th wave.

I have eschewed wave labels on this chart in order to analyze without mashing the waves into preconceived conclusions.

For the past month, the SPX has been contained within the black channel lines.  The lower line runs through the 1121.09 August 22 low and the 1140.13 September 6 low, the impulse down to 1101 just barely tipped past it and then violently reversed, and it stopped Friday's fall in its tracks.  It crosses 1150 at approximately tomorrow's close.  So far the market has shown this line to be important, and we must treat it as such.  A sustained breach must be considered bearish the market, at least in the short term.  A breach of the lower blue line is even more bearish.

On the other hand, a breach of the green lines - which follow the move down from the 1230 and 1229 highs through the 1204.40 Sept. 8 high - is short term bullish, and suggests a move back up to at or near the top of the channel.  Notably, we have time constraints on this move for any fourth-wave counts (whether Minute [iv] or Minor 4) - Friday afternoon it crosses the 1258 line which is used as the bottom of the wave [i]/1 in several counts.

The lime-colored line is also significant.  It seems to mark end points of interim moves a lot; if this is a 4th wave channeling triangle from 1101, it has marked perfectly the top of all the "A" waves up, and and retests from the upside seem to mark the 4th waves down of the "C" waves up.

BULLISH ARGUMENTS:
- SPX has bounced off channel bottom.
- On the 30 minute chart, we do not yet have a higher high with lower MACD(13,21,8) or lower RSI(13).
- "It doesn't look like P[3]".  I don't particularly like this as an argument, though.
- Options expiration is this week.
- There was a gap down on Friday - if it's going to fill, the market must go up.
- BCUZ BURNANKEY IZ GONNA ANOWNCE QE3 ON THE 21ST DUH GUYZ BTFD (I obviously am skeptical of this as an argument).

BEARISH ARGUMENTS:
- The 55- and 233-day EMA's are below the channel line top, and the 55-day EMA is now below the 1230.71 high.
- We do not have a lower low with higher RSI on either the daily, hourly, 30-minute, or 10-minute charts.
- Futures are down in the low 1140s cash-equivalent right now, which is below where I said the channel line was.
- Unemployment still stinks worse than gym socks after a long practice on a hot day with a mean coach.
- Europe is still a mess and China is still a bubble.
- The Chicago Bears won today.  The Chicago Bulls not only are offseason but are still on lockout.  (Okay, this one was a joke, but...)

9/8/11

The market promptly ignored the dollars flying out of Bernanke's mouth; it was already below yesterday's high let alone its interim high when Bernanke gave his speech, and didn't seem overall that impressed.  Heck, the dollar ignored the dollars flying out of Bernanke's mouth, rising basically to resistance.  Part of this is due to the fact that there were not, in fact, very many dollars flying out of his mouth; part of it is also due to the potential wave count.

Elliott Waves are first and foremost a phenomenon of social mood; the stock market simply reflects them.  Social mood does not have the nice property of only being on between 9:30 a.m. and 4 p.m. on weekdays, though assuming such works surprisingly well regardless.  The point is that especially when the futures have been active, you can't ignore what's going on in the off-hours futures market.  (Weekends, of course, are even trickier.)

(Also, I realize the above image is only of 1280 size rather than 1600.  Sorry about that.)

The subwaves after where I have (ii) are horrible; I haven't bothered to put wave labels on them.  If this really is (iii) down, they're probably expanding 1-2-1-2s and until I either see a significant 2nd wave correction (from this level, say to the mid-1190s), even one that's a gap up, or a clear 3rd down at semi-large degree (not necessarily Submin iii, but Micro [3] of i would probably help to resolve this situation), I'm not biting.

The alternate count is that this is Submin b of the corrective Minuette (ii) (or Minuette (e) of [iv], if you still want that count, although it's gone on so long that by now it would probably be best to call it Minute [e] of 4).  In which case the subwaves are still horrible; there's no clear anything that pops out as a potential [B] of b.  At the very least if this is only Submin b I think we need to fill the gap from 1167.  Of course, if it's Minuette (iii), we would also fill that gap.

9/7/11

It baffles me that people are discarding this count as a potential wave (ii) just because there's so much upward momentum.  In a wave 2, especially a sharp wave 2, there should be a lot of upward momentum!

Now, obviously I'm slightly miffed at both myself and the market because I am still long SDS from SPX 1158 (no, you did not misread that, and yes, I am bleeding badly), but:

1. There were a lot of gaps down to fill.  They fill at 1204.
2. Just because something "doesn't 'look' like a wave 3" doesn't mean it isn't a wave 3, especially if it's in a 2 of 1 of 3. There seems to be a perception, especially among perma-bulls, that it "can't" be P[3] because the market isn't down 5% every day.
3. The 78.6% correction is at 1211.
4. Does anyone really think Bernanke is going to talk about any upcoming QE3 with stocks at or near 1200?

It should also be pointed out that KRAP was up today by less than the market (1.93% vs. 2.too many% for the SPX).

My count still stands.

Futures Update

SPX futures are now trading at the 1150s cash-equivalent, which I believe to invalidate my SECOND count in the previous post.  The question now remains as to which waves will complete today and tonight before the markets open.  Particularly if futures move sideways in the 1150-1155 range, this would suggest Submin iv is underway, with the distinct possibility of it completing in the pre-market.

Unless I'm very much mistaken, Obama speaks Thursday after the market closes; this affords us 3 trading days in which to have Minuette (ii) so that the Minuette (iii) crash begins in the Thursday night futures and accelerates in the Friday pre-market and market trading hours.  Of course, that might be too convenient, but notice that the 1135 bottom (my Minute [b] wave) was at about 10:05 a.m. August 26, and the 12:30 high was around 10:20 a.m. August 31 - almost exactly three trading days.  Symmetry is conducive with a wave (i) bottom Tuesday morning, and then a Minuette (ii) "inverse cup and handle" rally lasting a day or two.

9/4/11 - Labor Day Selloff?

Well, obviously not, since U.S. markets are closed on Labor Day.  But the futures are open for trading, and they are down slightly at about the 1167-1170-ish cash equivalent - although they have come up a bit since their daily lows.

I see two viable wave counts, which I have labeled FIRST and SECOND.  The FIRST count is the more near-term bearish:  it has the 1170.56 low as only Micro [3] of Submin iii of (i) of [i] of 3:

The near-term bullish count, SECOND, has Submin v and thus Minuette (i) having already finished, in which case we would expect a move up in Minuette (ii).

Logically one would expect the gap to be filled in Minuette (ii).  This would occur at 1204.42.  If the current low is the low (i.e. count SECOND is the operative one), a 61.8% correction would take us to 1207.38 and a 50.0% correction would take us to 1200.26.

Given that my counts have us now in Minor 3, I find it hard-pressed that Minuette (ii) of [i] of 3 would retrace any further than 61.8%, though it could surprise me.  A 61.8% retrace, on a log scale, would fill the gap exactly with a low of 1163.07.  On the other hand, it need not make such a steep retracement right now; the market may seriously wait until Intermediate (2) - or even the next Cycle wave up! - to fill this gap.

It must be pointed out that we have a multiday island reversal, going into a long weekend, in a seasonally horrible time of year for stocks.  The only bullish "fundamentals" seem to be the religious belief that QE3 "must" be coming - "Bernanke will save us; Bernanke will not let the markets drop", the possibility of yet another European bailout that will work as effectively as the last billion (i.e. not at all), and news that certain data points weren't as bad as expected.  That's it.  And "fundamentals" don't affect the market all that much anyway.

There is the potential for the market to get as low as ~1135, a 61.8% retracement of which would bring us to the point of maximum acceleration at ~1193.  An 1135ish low, particularly one made Tuesday, plus the Minuette (ii) retracement would create a beautiful inverted cup-and-handle pattern that would foretell the deep Minuette (iii) impulse down to come.

9/1/11

This wave pattern is doing everything humanly possible to ensure that I can't figure out what it is.  There are "threes" everywhere.  But I did my best.

Yes, that is a large black "2" you see there, indicating that I believe Minor 2 to be over.  Yes, already.  (Which raises the question, why did I sell off my shorts today?  I don't know.  Nervousness, plus the distinct possibility it isn't?  At least I profited a bit from them.)  This seems to work the best with the sizes of the waves we know.

It should also be pointed out, though not shown on the chart, that the 1230 high almost exactly reaches the top of the channel line drawn from the 1208.47 Aug. 16 high parallel to the 1101.54-1121.09 lows.

A new downtrend, either Minute [v] or Minor 3, is not truly confirmed until we see a significant breach of 1190 and especially of 1181.  Until then, it is reasonable to consider the possibility (my large-scale alternate, as it happens) that Minor 1 bottomed at the price low of 1101, and Minor 2 is tracing out a flat with us currently in (iv) of [c]; in such a case, we could expect Minuette (v) up to... technically, anywhere short of 1350 (or 1370 if that was in fact the orthodox high), though probably not much more than 1240 (which the parallel channel crosses on Tuesday).  But a substantive breach of 1190 would nullify this count (it would have to be a pretty crappy diagonal).  Also, KRAP (currently at 1500.30) might want down, too, but as I have no intraday data for that it's hard to see what its waves are doing.

Obviously, since I postulate Minor 3 is underway, I am faced with the difficulty of what degree the waves are.  Strictly speaking, Minor 3 has no invalidation point; in practice, logical stopping points are 1017 (3=1 on log scale, and essentially THE invalidation point for bull counts (1010)) or, more likely, 904 (3=1.618*1 on log scale).  I think putting the waves at the degrees I showed is probably fairly accurate. 

These degrees (after my Minor 2, that is) also work well for Minute [v] counts, since a Minute [v] of 1 would, I think, look a lot like a Minute [i] of 3.  Additionally, the bottom of the channel currently is at about 1140; the Minute [ii] retracement in my primary would likely result in a retest of the channel bottom, which makes sense proportionally for a Minute [i] of 3 that looks like a Minute [v] of 1.