Planet Yelnick

Neely Goes Bullish!

Glen Neely now expects the S&P to take off later this week (or possibly early next week) and go to new all-time highs. Although he doesn't specifically opine on the Dow, if the S&P were to take off, so would the Dow. It too would be at record levels, and along with the Transports recently hitting all time highs, would be a massive Dow Theory confirmation of a bullish trend. (Forget the Naz, it has too far to go.) Most chartists would call this a fifth wave since Oct02, but the better count is the continuation of a third wave since Mar03, meaning it will be strong, persistent and surprise everyone. Now, you gotta love a technical method which on the one hand - Prechter - expects a 3d wave down, and on the other - Neely - expects a 3d wave up!  Fret not, Neely broke with orthodox Elliott Wave years ago, so this is less a dispute in the family than two competing methods. Shortly, we will know which one is sounder.

The Herd Bleats

Fairly predictable market action. Ever since Helicopter Ben signaled a possible end of rate raises in June, the market has moved sideways, avoiding the flameout that seemed upon us in May. This week the GDP figures came in below expectations, reflecting the slowdown in real estate spending and the end of the Katrina pop in the first quarter. Now that the economy is seen to be slowing, the herd expects inflationary forces to wane, and no Fed raise in August. According to John Mauldin, the Futures Market is placing the odds of a rate raise at only 28%, when it had been 90%. Wahoo! The market had a very good week last week.  But the herd does not know history.

A Major Divergence in the Count

NeoWave has split with EWI. Neely had been warning of the drop that occurred in May for months before. Like Prechter, he expected this to lead to a big downturn. He now sees that conditions are changing dramatically, and world tensions are shifting sentiment towards a strong upmove in equities. While this may sound surprising, recall what was happening in world events in Mar 2003 when the market turned sharply higher. Neely expected a sharper and deeper fall, and its stall over the past month has shifted the wave pattern - hence his call. If he proves correct, he will have demonstrated one of the values of an analytical, emotionless approach to Elliott Waves - sentiment is signaled in wave patterns, and a shift can be seen before it is generally recognized.  For those who like the Neely vs. Prechter comparison, you'll get your test in the next week or so. 

PS - The STU sent out a special update this afternoon, and stuck to their count: we are in wave [ii] of 3, and after a few days of retesting or slightly exceeding the levels of yesterday (or just dropping tomorrow), should begin the long-awaited [iii] of 3 down. 

Count Clarity

We noted before that Elliott Waves do not help much during corrections, and we have been in a correction since Mar03; hence many missed Wolf! Wolf! calls.  Prechter has only two forms of impulse waves, and 11 (or maybe it is now 12) forms of corrections, and many corrective waves can extend in double or triple forms.  Yet now we have a moment of clarity, and a very clear call by Prechter.  This being free week, you can see it in today's STU here.  Is the 3 of 3 upon us? 

Count To Three

The drop off the May highs looks like 3 waves down, which would suggest this is a correction in a continuing bull - read Tony's blog for more on this view.   He also gives downside targets that would break his bullish view. Worth reading.  The downlegs have been faster than the uplegs, however, which undermines the bullish case.  Could something else be going on?