Coiled Spring

Prechter's STU sees us in a series of nested waves 1 and 2, a formation which creates a coiled spring: when it breaks into wave 3, it will run hard and fast.  The biggest wave 2 (or B wave, it creates the same result) ended on Mar7; the next largest wave 2 ended on Jun1 (Dow), Jun2 (Naz) and Jun7 (S&P) as a bounce of the bottom in April; and since then all the indices have done a small degree wave i down and wave ii back (although the pattern in the Naz is murky at best).  If this count is right, the downside break should happen anytime from next week to the end of the month. 

Prechter called a similar formation to the upside in late 1985, and made his best call as an analyst.  He called the same formation to the downside in Sep02, stating he had the same confidence as in 1985, and made one of the worst calls of his career, as the downward momentum truncated. 

His current analysis also looks to Google as a harbinger, much like AOL in the 2000 top and Netscape in the first Internet craze in 1996.  GOOG ran to just under $300/share last week, then dropped, and seemed to pull the S&P down as well.  CNBC ran a GOOG ticker to see if the GOOG would bust $300. This sort of attention on a stock which has run up 'parabolically' since March means that its failure to sustain the ramp could pop the bubble on a whole class of Internet stocks, which have been running at bubblicious P/E ratios since Mar03.  One of the characteristics of a B wave (or a wave 2) is that the euphoria of the prior top often gets recapitulated, if not exaggerated, since the players believe they caught the bottom and are therefore even more hardened in their conviction for the bubble echo stocks.

Hence watch GOOG to see if it makes another run at $300.  If it crashes through on its way to $400, we may not be done with this wave B psychology yet.  If it fades off $300, we may be close to the coiled spring denouement.

Comments

[Gary Tripp]

I've noticed that the AMEX has formed a bull flag recently, which suggests a pop upwards. The QQQQ's look ready to rocket upwards to me.

[James Sterling]

STU has stopped showing alt. counts as if there is only one way to count the recent action. This is bias analysis. GOOG's break out of the triangle projects to 366. However, I think we get a really good pullback this week before we make higher highs.

[Jeff Dickey]

Hard to say what will happen but end of quarter squaring coupled with triple witching toward the end of the month always causes volatility - so it's probably a safe bet that something's going to get crazy. However, the Fed's signaled inflation is under control, the economy is growing at a reasonable pace, productivity increases are strong, foreign banks are starting to lower interest rates, the dollar has strengthened and corporate profits seem to be pretty strong. So, I wonder what, exactly, will trigger the decline. Maybe at the end of the month the Fed doesn't signal an end to rate hikes and that causes the markets to decline?

[S.Satrams]

May I suggest McLaren:
http://www.mclarenreport.com.au/yvs500/default.asp?id=387

His elliott interpretations coupled with Gann is much more down to earth... and he usually gets it right.

[reggiegiannitti]

I think the stock market is a kind of proxy for human civilization so it's like a living thing. While growth, when it happens, is pretty steady, decay can happen suddenly, just as living things get sick... or die. So, while Prechter might be wrong, I don't think he's any less "down to earth" as anyone else. Here are my qualifications: I've lost a ton of money in the stock market. Here is what I'm paying attention to now: Lots of press about the "real estate bubble." Here is what I think it means: We are close to a top --maybe it was March, maybe it's tomorrow, but 95% chance it's within the next year. I think the magnitude of the bubble is such that it makes sense to see a lot of people talking about it before the pop.

[J. Jones]

This stuff is a joke. I can't believe somebody with a brain would believe in such nonsense. the only way to make some money with this elliot wave is to sell it to morons .

[s.satrams]

"A man convinced against his will, is of the same opinion still"

So I'm not going to push anything, especially when I see the sort of irrational emotional response of J.Jones...

All I'll say is that McLarens archive is there so that one can see his trackrecord, that is more than what can be said of Prechter & Co.

-happy trading !

[EN]

So far, since the recent high of almost 1209 the S&P has traced out an A and today it completed a B of a flat. Today's high was close to the high the other day so we should expect a five wave C to occur June 15 to complete this 3-3-5 structure. June 15 is also a fib turn date. Then we go off to challenge the March highs in another 5 wave blast off. I don't know why those guys at EWI don't pay attention the the internals of the S&P 500 - more stocks are breaking resistance than support which should clue them into the fact that this thing is in the mark up phase and not the distribution or breakdown phase. Then again, I just learned this stuff last year so what do I really know compared to the guy that wrote the book.

[Achal]

Try as I might, I don't see anything that fits a "wave count" for the last 5-10 days or so: does that simply imply that this is a complex correction? If so, doesn't that mean that the breakout should be in the direction of the previous trend? And if so, WHAT is the prevailing trend? Erlanger's choppiness index says that there IS NO trend in the SPX currently evolving over the 14 days.
Color me confused.

That said, it is possible to count a completed impulse wave (Wave iii?) from the May 13th low to the June 6th high. Is the current wave a sideways iv?

[EN]

It looks like the NDX broke out of a contracting triangle (B wave) this morning such that wave E of that triangle was the opening gap. That would mean the .786 recovery in the afternoon was a second wave of wave C such that tomorrow and Friday we should get 3,4,5 to complete C. There is an open chart gap on the Nasdaq around 2000 that might attract prices over the next few days. But since we have a triangle and we know the triangle proceeds the final move, this C wave should complete the correction and start a new second major bull advance to marginal new highs for the year. When you put this speculation together with quadruple witching, we might be in for some fantastic intraday swings for the rest of this week and beyond. Maybe GOOG does take out 300 afterall leaving the bears *@3&ing their shorts.