Planet Yelnick

Yves: Wave 4 Has Been Still On

Yves latest opinion, that the five-wave count off the Mar9 low has been wave C of (4).  Yves will appear as the featured guest on:  Fox Business TV, The Closing Bell, from 15:00 to 16:00 and Bloomberg TV, Taking Stock from 17:00 - next Thurs, Apr9. 

His opening paragraph discusses sentiment, and why a real bottom is full of skeptics, not bulls-in-waiting, ready to pounce.  He goes to discuss the macro economic factors which say a recovery is not yet in sight. He expects a down wave, and the next drop will indicate which count: a C wave in 3 waves down or a 5th down with impulsive action.

Party Like it is 1938

The STU made a clear comparison to the market in 1938.  Kudos to Da Bear, who commented on this in the prior post, and noted the odd behavior of wave (5) then and now - a very small 4th wave.  The STU has more than this chart, and their other charts are worth reviewing, and suggest that we should retest the 2-4 line (the upper trendline that connects the tops of waves 2 and 4), meaning a fall of around 50 SP pts.  Not required but would match 1938.

If we are in 1938, then after the test of the 2-4 line, we should have the expected multi-month rally to above Dow10K and SP1050. 

Next week should clarify. Other charts and possibilities and an analysis of sentiment readings, below the fold. 

Obama Hope Rally Appears ON

We have been waiting for the great 50% bounce that we saw after the 1929 crash.  The runup from Nov21 to Jan6 was on time as in 1929-1930, but failed to sustain.  Now we have had the best 10 day rally since 1938.  Maybe we were watching the wrong crash (1929 instead of 1937)?  In any event, the STU is more confirmed in their view that the great wave [2] rally is on, and should crest Dow10K (on a 50% rally).  Today we ran above the upper trendline of the whole wave [1] down since Oct07, indicating a strong trend change is underway.  In the short term, we may see a pullback to the top of that trendline at SP766 (Dow7258), before a really storng wave 3 of [2] drives us towards unexpected heights. 

Tongue firmly in cheek, I call it the Obama Hope Rally, or maybe should have renamed it the Tom Terrific Finally Has A Plan Rally; but it should be called the Technical Bounce That Always Happens Rally.  The wave 2 that followed 1929 went 50%, and wave 2's usually go 50% to as much as 62% back.  (It is those pesky wave 4s that meander and fool you, usually at best a 38% retrace.) 

Interesting is Neely today.  He called this rally so far better than Prechter, who thought it had no business above SP780.  Indeed Neely has called this market much better for weeks.  Yet he also thought this rally would fade above SP800, with an outside level of SP850.  Today's move was much stronger than his contacting triangle count would have expected.  Hence he is standing aside to see how this develops. 

A Vergence in the 4s UPDATED 3/20

Neely this morning expects a continued up move this week, with a break of SP800, followed by a contracting triangle.  The STU tonight expects wave 4 to have peaked, but not necessarily to have ended - if it doesn't drop hard this week, it may break as a triangle over the next two months before the drop in wave 5.  Hank Wernicki of Elliot Fractals sees the end of wave 4. 

UPDATE:  The STU's count was blown Wednesday. They have shifted to: wave (4) ended in a triangle on Feb9, wave (5) bottomed on Mar6, we are now in wave [2], with a target in the SP900 range initially, possibly to sightly above SP1000.  Best alt count: wave 1 of (5) ended Mar6, we have been in wave 2 of (5), a big 3 of (5) down is coming.

UPDATE 3/20: For those who still hang on to minor wave 4, here is the STU take Friday evening:  "Wave 4 has already overlapped the low of wave 1 in the DJ Wilshire 5000 (the broadest aggregate measure of market behavior), NYSE Composite, June E-mini S&P, S&P Equal-weighted Index, Value Line Index and MidCap 400 Index. And, before both NASDAQ indexes pushed above their respective wave 1 lows earlier this week, the NASDAQ 100 failed to confirm the March 6-9 lows in the other indexes, creating a bullish inter-market divergence."  This is either wave 1 of [2] up, or a more complex corrective structure, such as wave 2 of (5) or leg c of (4).  Either way, a fairly deep pullback is expected; and Neely today tells his traders to stand aside for the moment. 

Which Wave 4

Interesting debate on many elliott wave blogs, such as Afraid to Trade: are we in a little wave 4 of (5), or is this a wave iv of 5 within wave (3) down?  The nomenclature can get confusing, so check out the charts on that site. If wave 4 of (5), then the interim bottom will be around SP625, and a big bounce is coming, soon.  If a little iv of 5 within (3), then the coming bounce won't be as robust, nor as long, and the subsequent interim bottom will be lower (SP500). 

Wave 4 Appears On

Good STU tonight.  Their prime count is wave 4 of (5), with a final wave 5 of (5) to lower lows, likely SP625-630.  They speculate that if wave 5 of (5) were to equal wave 1, a common relationship, this wave 4 should end around SP760 range; but this is a guesstimate at this stage.  Firmer is that wave 4 should break as a zigzag (rule of alternation - wave 2 was a flat), hence is only around half ways up so far, since we appear to be in wave b of the abc zigzag. 

They discuss whether this is instead the Obama Rally - the  wave [2] of the whole drop since Oct07, and this section would of keen interest to traders playing this rally or waiting for a lower low to come.  To support this, the count would change to a running triangle from Nov21 to Feb9, with the truncated e leg being the runup to Geithner's plan, and the severe wave 5 drop reflecting the profound disappointment in that plan.  This would place Neely's count and the STU's much closer.  Hochberg ends with a priceless rant about misuse of Fib levels in the financial press that makes this issue worth reading for that alone. 

Yves Sell Signal

Neely is bullish this morning, up to SP800.  Market is struggling to maintain rally, but have just turned positive again.  Cramer says last night on CNBC that financial stocks are a surprise buy after the Citi profit yesterday.  Yet all is not rosy.  Yves has a new update:

Is this the sign of real danger ahead?

This is the first time that my liquidity index has generated 3 consecutive sell signals.  At the top just before getting to 14,000 on the Dow, we did get  2 sell signals. Getting 3 in a row is a first. It does contradict technical analysis where many bears are looking to turn bulls. It also weighs against our current perception of wave structure. The battle is on and the answer coming up shortly. Is my liquidity index telling us something important ?

Yves Lamoureux, Investment Advisor, Blackmont Capital Inc.

Disclaimer: opinions and projections contained are of the guestblog author and may not represent the views of Yelnick, Blackmont Capital (BCI) or any other organization. The information contained herein is for information purposes only and this report is not to be construed as an offer to buy or sell any securities. Neither Yelnick, BCI nor the author accepts any liability whatsoever for any loss arising from use of this report or its content. The comments and opinions expressed in this letter are the result of work done by Yves Lamoureux. They may differ from the opinion of Blackmont Capital Inc. ("BCI") and should not be considered as representative of BCI, belief, opinion, or recommendations. The statements and statistics contained herein have been prepared by sources we believe to be reliable but we cannot represent that they are complete and accurate. This material is published for general information only. BCI assumes no liability for financial decisions based on this information. Readers should obtain professional advice before applying any ideas mentioned to their own personal situation to ensure their individual circumstances have been properly considered.  BCI is an independently owned subsidiary of CI Financial Income Fund. CI Financial is a Canadian owned diversified wealth management firm

Yves Revisits The Count, and Riffs on Hendrix

We may be in that wave 4 pop of Prechter, right on schedule; but we had a pop like this last week which faded fast. Yves weighs in with an alternate view of the count, shown in this chart.  Could we still be in a large triangle back to 2000, maybe a rare Expanding Triangle?  Read on. 

Also, you can hear Yves today on CNN Radio at 430 ET.  Or via Wall Street Shuffle.  

Bear Trap Rally, Part Deux

When I wrote of the bear trap last week, I meant that: a trap for the bears.  I must have written it poorly, since many of you interpreted it as a bull trap - a trap for the bulls.  A similar trap was sprung in Oct02, when Prechter believed in a much deeper fall that never came, and the snap back rally caught the shorts.  Now he believes in a fake rally and  deeper drop, freezing the shorts.  A week later, Neely still expects a sharp 4-5 day rally any day, and the STU still expects a sharp wave 4 rally to happen in their turn window of tomorrow (Mar10) thru Mar19.  Yet the market continues its slide downwards, with several really nasty 90-90 days.  A very hard market to trade, particular for bears who lightened up awaiting the rally and a new shorting moment. The bulls have steadily moved to the sidelines, and I daresay many have sworn off equities for a while.  Sign of a bottom coming to be sure, but with the bears waiting to snatch a new short after a rally, the bottom slowly fades even lower.  We are in that range, from Dow7400 to Dow4000, with no really good support level or stopping point. See my last post. 

Any guidance from my readers?  Do we buy the Neely/Prechter view, or is something else going on?

How Low Might It Go

Lots of reader questions and speculation on this.  Before I dive in, note that it may have bottomed last week - for Neely, an end to the X and time for a pretty good rally, maybe up to SP800; for Prechter, an end to wave 3 of (5) down, with a fast wave 4 and then a final wave 5 to go.  That final wave 5 is likely to go lower than the low last week of Dow6470 / SP667.  That said, here goes. 

Yves Sees The End of an Era, The New Start

Yves Guestblog:    An ending era and a new start….

It is about time that we turn the page of this horrible episode of greed. From one bubble to the next, we had lived beyond our means.  The stock market being the great equalizer has cleaned up the slate. We will have soon to be completed a brand new start.

Perhaps fewer promises from the current administration and more decisive actions are now required.  Making the hard choices now makes us suffer less; if any lessons had been learned from the Japanese meltdown,  this is it.

Things better get in motion soon. Capital flows are fast paced and so is entrepreneurship.  (Details, recommendations and timing below the fold.) 

A Depression Not A Recession

Revealing chart here.  (This link is updated daily!) It shows we started as if a bad recession, matching 74 and 01.  But ever since TARP was proposed, we crashed and caught up to the terrible trajectory of 29-32.  We have gone beyond the recession pattern and caught the depression pattern. It will be even worse after the close today, where we seem headed for a 4% down day, bringing us to almost a 60% 57% drop so far. 

While I still anticipate a wave [2] bounce of 38-50%, the pattern from 18 months after the 29 crash to the bottom lacked that 50% retrace; it came shortly after the crash.  We shall also now see if this wave (5) of [1] will extend to a much lower lower, or find a bottom in the next week. A special STU today says wave 3 of (5) is extending.  No wave 4 yet.  

Neely Accuracy Recognized

From a Neely bulletin today: "In February, Timer Digest listed NEoWave’s S&P Trading service in the TOP 10 for all three categories:
- the last 3 months,
- the last 6 months,
- and the last 12 months!

While most people were losing money, Glenn’s advice kept NEoWave subscribers on the right side of the market."

Bear Trap Rally

The current sharp rally matches the expectation of the STU of a sharp wave 4 followed by a final wave 5 to end this large move from Oct07.  It may cover 38% of the wave 3 drop, which puts it around SP750. Tonight's STU sees at least a retrace to fill a gap on the way down at SP735, and probably up as much as SP780, the area of the prior 4th of the 3rd.  More details this weekend.  Neely expects a stronger retrace, of 100-150 pts in the S&P, possibly back above SP800.  (This would exceed the low of wave 1 of (5), violating one of Prechter's rules, so we would have a fundamental conflict in the two approaches and counts.)  A move to SP750 or above is likely to draw in the bulls that have been waiting for the bottom.  Both then expect this to be a bear trap - pulls in the bulls than drops precipitously to new lows.  Neely has a much deeper low in mind than Prechter. 

Will it play out as a bear trap?  In Oct02 the sharp runup off the bottom caught Prechter by surprise, and it took a while for the STU to grasp the extent of the subsequent rally, particularly after Mar03. We shall see, but in this case both major wave pundits agree on the coming trap.