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. 

Neely's target range is to break SP800 but not SP850, followed by a consolidation period in a contracting triangle. In contrast, under the STU count, a break of SP780 (Dow7405) would mean that wave 4 had gone too far, close to wave 1, violating a rule, and something else is going on.

The STU expects a zigzag or a triangle under the rule of alternation - wave 2 was a flat.  The action in the past 5 days is a classic zigzag - sharp move in a 535 pattern.  So this little wave 4 could be over.  If it doesn't break rapidly down, it may instead break as a triangle, where today's high (SP775) is the peak of this wave 4. 

Yet the STU still thinks the odds are highest that it is over.  Most telling technical indicator: the put/call ratio is back to the same ridiculously bullish level of the Oct07 top, the May08 wave (2) top, and recent tops on Jan6 and Feb9.  The market is anxiously anticipating the big wave [2] bounce, and optimistically jumping the gun. 

Hank is watching prior wave patterns (fractals). Da Bear brought up an interesting pattern from 1937-8: the whole move from 1937 to 38 looks eerily like the pattern from around Jan08 to today.  In that case, what we would be counting as wave (4) continued all the way into Feb from Nov before a steep wave (5).  in our case wave (4) seemed to be breaking as a triangle into Feb, but broke down rapidly and the count was recalculated as wave (4) ending on Jan6; but the triangle into Feb9 is still feasible.  That pattern would support a rapid drop in wave (5) to a low at the end of this month. 

The target for that rapid low remains SP625 area, which could be better stated as 'low 600s'. If wave 1=5 then SP630-35 is a reasonable target. 

if SP780 is broken, the count will shift.  One possibility is that the big wave [2] is underway, but curiously given all the fractal comparisons to 1938, another is that the wave (4) triangle has not yet ended.  This leg of it has only broken as a three-wave pattern so far, so if what we have been calling wave 4 breaks the wave 1 area, the down leg will fit a triangle, and we would have entered a new up leg.  Simple count:

leg a: nov21-Jan6
leg b: Jan6-Mar9
leg c: mar 10 - ??

Comments

[Canadian Money]

I also see signs that suggest the SP500 rally that began on March 6th may have ended today.

With respect to alternation, one possibility is that wave 2 (of 3) was a zig zag in early February. Then, if this rally is the final C wave of wave 4 (of 3), then alternation may have already occurred.

If so, then 810 would then be the extreme upper limit of the current rally.

CM

[Glenn Loser Neely.]

duncan,

how much money do you receive for promoting Neely's garbage?

[Upstart]

What's being missed here is this: Look at the 1937-1938 decline in At The Crest or any chart that's large enough. Look at the 5th wave. It subdivides 1-2, then just spikes down without an obvious wave 4. In other words, it looks like a three. And our recent decline looks just like that - a three. It's over. The 5th wave is over. A pullback will be just that, a pullback that fools everyone, not a move to new lows. This is where Elliott has you looking for something that isn't going to happen. Good job da bear, for bringing this chart to our attention.

[Mamma Boom Boom]

'Fib Correction' started yesterday afternoon.

Ned

[EN]

So, Neely says that this is the final wave up in the X wave before a massive decline and that this final wave up with END with a contracting triangle such that the new decline ends from a lower high?

Interesting stuff, but I will stick with day trading.

[DG]

Historical analogs are all well and good, but the waves right in front of us count differently. This may (and in all likelihood will) end up being the only triple three running correction at this degree that we see in our lives and you guys want to go long off the second x-wave of it. Good luck.

[DG]

EN,

No, this is the A-wave of the final pattern (which may or may not be a contracting triangle. That's just a common way for complex corrections to end, but isn't the only way) to end the X-wave that began at the October 14th low. The subsequent decline should match or exceed (%-wise) the first stage of the bear (everything from the alltime S&P high to the October 2008 low).

For the record, I am going to trade almost all legs of this final pattern, although my sense is that Neely will only trade the A-wave, which he's been doing. Neely just took 60 points off last week's bottom and still has two open trades with similar amounts of profit. If the A-wave ends up being as big as expected, the B-wave should be worth a good 100 ES points in total, although I am not going to try to top or bottom tick that trade, so let's say I get 50-60% of it.

Then, I might or might not trade the C-wave, but even that should be worth a good 50-75 points from top to bottom, but it'll probably be very quick.

If it does break as a contracting triangle the D-wave and E-wave probably won't be worth trading but I'll start accumulating my position for the next major leg down and will hopefully be positioned for it a day or so early. My suspicion is that it will start overnight and open up a huge, possibly limit down, gap on the ES, so being early will have its rewards.

As always, the market reserves the right to do absolutely none of this.

[Robert Murdoch]

DG:

I am a newcomer to this blog, so please excuse my ignorance.

Are you referring to a triangle formation with an A-up, B-down, C-up, D-down, E-up move, followed by a break to the downside to conclude the wave?

When would you expect the next major leg down?

Apparently there was a small move in the McClellan oscillator on Monday, so we should see a fairly significant move in the market either Tuesday or Wednesday. Based on the calls in the past from the technician on this website, I would suggest it is the typical Tuesday afternoon up move for the week of options expiration.

[yelnick]

Loser - $Billions

[DG]

Hi Robert,

Hey, we all start somewhere, so no need to apologize. Essentially, what you said about the triangle is correct, that we're going up in A, will go down in B, etc. However, following that, a new wave pattern will start (that is the forecast, anyway), which will be unrelated to the triangle.

Timing is "relatively soon", as in within the next month to 6 weeks. However, if "everyone" catches on that we're in a triangle, it could morph into a pattern that Neely calls a diametric, which can be thought of as a triangle with two "extra" legs of approximately the same size and time as legs A and B at the beginning of the triangle.

[Robert Murdoch]

As I alluded to above, we got the typical up move on the Tuesday afternoon of options expiration. Now the interesting question, of course, is where do we go from here. We are very close to the SPX 780 mentioned above. I believe I also read somewhere today that either Hank or EWI said to watch SPX 780 and DJIA 7405, but I can't locate it now.

[da bear]

I think it was Robin Landry that said to watch 7,404. but it could be EWI too. a few weeks ago I said that 7,500 on the DJIA would be the key for a spring rally at my message board...

da bear

[String]

From EWI STU : Today’s highs should mark the top of wave 4, or at least the price extreme of wave 4. We
remain short-term bearish against 780 in the S&P and 7405 in the DJIA.
(monday 3.16)

[Robert Murdoch]

Now I have found it. The SPX 780 and DJIA 7405 relate to the STU reference in the 2nd paragraph of the March 16th blog.

[Steven_737]

Hi Robert;

"we got the typical up move on the Tuesday afternoon of options expiration"

would you post the "typical moves" during options expiration week, that you refer to?

thanks

Steven_737

[Robert Murdoch]

I can't post the typical moves during options expiration, but have observed that quite often the market is strong on the Tuesday of options expiration. I suspected that we would see an up move today because of the small move in the McClellan oscillator referred to by Dr. Robert McHugh in his website. He also felt that their would be an up move based on the 15 minute stochastics that he looked at after yesterday's close.

Obviously, short covering had a lot to do with the surge in the last 30 minutes of trading today.

[barood]

Neely is the master of the markets. He knows the market as a scientist and not as an artist. No one matches his vision and experience. The problem is not Neely but those who have hard time grasping him.

[Ted]

re: "Neely is the master of the markets. He knows the market as a scientist and not as an artist. No one matches his vision and experience. The problem is not Neely but those who have hard time grasping him."

Also hygiene.

[-]

no

[EN]

Thanks DG. I have often seen these Neely triangles that end moves. They fool the tradional EW analysts because they expect the triangle to be a continuation pattern and not an ending pattern. Another 600 point drop in the SPX from the next major swing high, eh? I hope it works out. Let's hope it does not also coincide with a major world disaster if it does. If the SPX gets to 200, I will remortgage the house to go long!

It is very positive that we got above 7400 as that is a major pivot. If we have another up day tomorrow and then come back to test 7400 as support, I think it would be a buy from my simple pivot trading methodology. Wild action today, glad to have survived with profits for the day!

[Steven_737]

"If the SPX gets to 200, I will remortgage the house to go long!"

are you certain that banks will be willing to lend you money at spx 200?

and have you considered what your house "will be worth", given that the spx will not go below 500 (at this juncture anyway) unless there is huge damage beyond repair.

one must be careful what one wishes for;

take care.

[DG]

EN,

Yes, until I read Mastering Elliott Wave I always thought of triangles as being either B waves or wave 4s. Anyone doubting that they can end a pattern should check out the end of the 2000-2003 bear market. Again, though, the triangle is still just a placeholder for whatever pattern ends this running correction, assuming that's what it is.

Neely's call is on a percentage basis, so he's looking for the ES to decline nearly 40-50%. I have also wondered about the potential catalyst for such a move and there are certainly some scary scenarios that come to mind, unfortunately.

[Robert Murdoch]

EN

Could you please clarify what the ES is? Does it relate to option contracts for the SPX?

Thanks

[DG]

Robert,

ES is the shorthand for the S&P 500 e-mini contract.

[Forkoholic Serge]

updated my Forkoholics Official count. Wave (3) has ended on March 6th
http://forkoholic.com/officialcount.htm

Looking at solunar chart the only other Bearish possibility I see what Wave 5 is an ABC and we finished just A of 5 and will start C of 5 in May

Looks like next week will be a retracement to 750 or lower
if we fill 830 gap by Fri/Mon 750 will be 50% from 666
http://forkoholic.com/images/spxfork031809.jpg

[Forkoholic Serge]

Short in May, the Bear is here to stay ;-)
http://forkoholic.com/images/spxsolunar031809.jpg

[Mamma Boom Boom]

Pullback is going to be a tough one to work with, IMO, before a resumption of the advance. Maybe only .382.

Presently, lot's of upward pressure.

[Mamma Boom Boom]

"House passes bill taxing AIG and other bonuses"

The main lesson to learn from this is that the government can take money from you or me, at a whim.

Bonus argument aside, they passed a law to take this money in less than a week.

Be Afraid....Be Very Afraid!

[Canadian Money]

One possibility I see at this time is for a 3 of 3 to start down relatively soon. This count alternative classifies the current rally as part of a lower cycle second wave, perhaps the final C wave of Elliott's irregular.

CM

[Yves]

CM , You saw my graph where A was labelled. This is my B wave completed.We are going to see this C wave extend or not.It will blow away the 5th wave target down the same way this "4th" blew away the 4th wave scenario of many.How can you sell wave counts for a living and not even be able to characterise the psychology of a 4th wave appropriately.In the end labelling correctly waves entails listening to the crowd.

Yves

[Steven_737]

Having read a lot of alternate wave counts - most of which try to anticipate a huge damage -, I retain the "keep it simple" point of view.

http://farm4.static.flickr.com/3433/3369554110_cd40407d33_o.png

If you disliked the shape and count of w1 from the January top and
if the extension of w3 threw your 5 wave count off,
then
this rise of w4 almost into the end of w1, provides a hint:

An ending diagonal is at play;
the market is about to start w5 of (5) of C (or w5 of (5) of [1] for those following the Prechter count presented by Yelnick).

I still think that SPX/ES 625 is a good estimate for the bottom.

According to this scenario an intervening X wave of 7~15 months duration retraces 50% ~ 62% or even 78% of the drop from 1575, followed by another ABC that lasts 2~5 years.

The alternate count is that this w5 completes (3) of C (similar to w5 of (3) of [1] as per the count suggested by Sergei and Yelnick in previous posts.

Yves, I think that the Puetz window is over, as it closes 3 days after the full moon. Thank you for bringing it up; I have never seen it before.

cheers.

Steven_737

[Steven_737]

" perhaps the final C wave of Elliott's irregular. "

CM,

I cannot follow your thought.

I would appreciate a schematic, if possible.

Thanks.

[da bear]

Yves, you just mentioned the "4th wave" which blew everyone away. i guess you mean the run from 6,500 to 7,500 (or so). It looks like it may be over, and I am guessing that you think it is. Thanks on notifying me of 7,300 to 7,400 being a possible top. Before that I had 7,500 as the DJIA level to look at (whether the rally was the real rally), but I have no idea really where I got the number. lol

The DJIA didn't hold 7,500 and it closed below 7,404 for the day, the financials reversed and the futures are currently down. also, gold hit $960 (which was an area of resistance according to Dan Norciani at Jim Sinclair's website.

The way I viewed gold is this way, a five wave rally from the $690 lows late last year to a wave 5 high at $996, then an A wave decline and this B wave that we are now in or are about to end consisted of a 3 wave advance where you had an a wave spike to I think $940, then a 'b' wave decline that slightly exceeded the ending of Wave A, and the 'c' wave higher hit $960. If $960 proves to be resistance then I think we go back down in the bigger Wave C decline (comprised of five waves down?) to correct the advance from $690. For the big picture I have the true end to the HUGE bear market from the 1980 high as having ended late last year. ... the rise from 2000 or so to 2008 looked odd, too good to be true and too much bullish investor sentiment (oh, and silver failed to even reach half of its all-time high), and that was followed by a horrific collapse which took Newmont Mining to price levels seen in the early Eighties, and junior miners got killed worse. So, crazy as it sounds, I think that may have been a D wave upward correction. Then the brutal decline into late fall was the final E wave decline of the secular bear market. ... that would be similar to the Japanese stock market which had a big run from the early 2000's lows into highs last year, but as you probably believe, it was just another bear market rally. given those two markets, wouldn't it be better to view the 1929 to Thirties market as having made an A wave decline into November 1929, followed by a B wave top in late spring 1930, then a C wave decline into 1932, a D wave upward correction from 1932-1933 to 1937, followed by another leg down (the last one) into 1938. That pattern would then fit in great with the gold bear market and the Nikkei bear market. This current US bear market seems to have elements of all the greatest bear markets in history.

Sorry for the rant, but that's what I do. lol

da bear

[Canadian Money]

Steven

I have posted a wave count for the SP500 on my blog. It shows the possible irregular wave 2.

http://recentlyretired.blogspot.com/2009/03/s-500-index-elliott-wave-count.html

CM

[Hank Wernicki]

March 20th

Fractal Update:

http://www.elliottfractals.com/HERE_2_17_09_march20.jpg

f8 = March 6th

f9 = 900 +

There is a possibility that f9 will fail ..... so this remains a Bear Market Rally

A Close above 800 will confirm the Growth Fractal

Staying beneath 800 turns into a Decaying Fractal ( Reversal )

Hank

[Yves]

Steven 737, the equinox cycle also can be associated with crashes with 6 weeks + or -
from the 20 March .
What is sad is that Alphier is back at neutral . We were missing 11 down days to tigger a rare buy signal.So it is reset and we will need again 20 days + to tigger.
Woah this could lead us really really lower.

Yves

[Yves]

oops I meant trigger ....morning time no coffee

Y

[Steven_737]

Having seen how ecstatic you guys are about the ending diagonal prospects, I will treat you to the corresponding NQ count:

http://farm4.static.flickr.com/3592/3369614957_518056d0a7_o.png

Now, don't get too excited;
the estimate for the NQ bottom is 1000;
the case of a double bottom at 1017~1030 has merit.

Steven_737

[Yves]

Da bear , great rant . I meant to talk about the perception of counting the bounce as a 4th wave which as yelnick wrote blew away the STU's count.Clearly not the type of action associated with a 4th wave .It is clear that players made a stand at this being THE bottom.A4th usually shows indecisiveness and confusion which is not the case.The wave has too much vigor so it is rather a 2 of a sequence like CM suggest or a B wave which is what I suggest.The next down move will therfore not unfold into a last small 5th wave like the consensus is looking for but into a bigger sequence.

Yves

[Steven_737]

Yves,

"What is sad is that Alphier is back at neutral . We were missing 11 down days to trigger a rare buy signal.So it is reset and we will need again 20 days + to trigger."

I am not sure what you refer to;
I would appreciate a link to read more on this.

"this could lead us really really lower."

Well, SPX 625 and NQ 1020 is a lot lower (from current levels anyway);
after all, investors want to buy shares in companies with prospects, not buy shares in junkyards that nobody believes they will be around by 2015.

Even futures (ES and NQ) traders, need to be trading an instrument that has liquidity; a decent stock market that keeps players interested is required.

If SPX and NDX comprise of penny stocks, the market identity will change and liquidity may turn to other markets.

Your thoughts on this, please??

take care

Steven_737

[Tom CZ]

Guys - I do not want to burden you with new wave count as there are many here but few points:

1/ Majority of market does expect new equities drop,

2/ I looked at ICI fund flows data - they are showing there was heavy funds outflow at the end of February/start of March so market sold out again like around November lows (in sizes), which was followed by rally

3/ Are not you afraid of dollar fall and its denomination to the prices - I mean we can go higher eg on the stocks in nominal values do not speculatin about the move in real values

Tom CZ

[Yves]

steven 737 , I posted 2 graphs of Alphier recently in this article posted here on Yelnick.

http://yelnick.typepad.com/yelnick/2009/03/yves-sees-the-end-of-an-era-the-new-start.html#more

Yves

[DG]

What I don't understand is why a lot of you are looking at things besides price and time? Any data set outside of those two has a possibility of simply confirming bias, rather than showing what the market is doing and will do. Plus, as Neely says, price is the only indicator that directly impacts your bottom line.

[DG]

Steven 737,

In ending diagonals, the 1st wave is more likely to be the longest wave, not the 3rd wave. If you think about it, it makes sense because whatever direction the market is moving in, the momentum in that direction is waning. For that reason alone, I doubt that this is an ending diagonal.

[fred]

alphier signal appears sufficient but not necessary

[Canadian Money]

Ives

Perhaps your comment about 'selling wave counts' was just a reference/question about others who do. I don't sell wave counts.

CM

[Canadian Money]

Error... should have been addressed to "Yves".

I hope my counting is better than my spelling.

CM

[Photoguy]

Au to two-K within three fortnights...unavoidable.

[Yves]

CM no worry I like your count .. it shows originality .I did mention your alternative as an example of thinking outside the box in my last comment.We do need more of this rather than following the consensus count.

Yves

[Yves]

Alphier Signal Update.
Yelnick , you did show interest in my alphier signal chart (prolonged liquidation index) .Since the recent bounce , alphier is now perfectly balanced.It would require more than 20 down days + to create a buy signal.

Yves