Dow Theory Gives Qualified Confirmation

From Prieur du Plessis (also over in SafeHaven):

The long-awaited Dow Theory bull signal finally arrived on Thursday. This came about as a result of the Dow Jones Industrial Average and the Dow Jones Transportation Average both breaking through their previous rally peaks (registered on 12 and 11 June respectively).

Richard Russell, "Mr Dow Theory" and author of the Dow Theory Letters, forthwith replaced the bear on the first page of his daily newsletter with a long-horned Texas bull. The long-timer said: "I believe we are now dealing with an extended bear market rally (some will call it a cyclical bull market). But I'm operating on the thesis that a primary (secular) bear market is still in force (although it has been suspended for a while). In my opinion, the true final bottom for this secular bear market lies somewhere ahead.

"Remember, on March 9 very few of the items characteristic of a true bear market bottom were seen. There was no extreme pessimism, there were no huge bargains in stocks, and the public continued to be hopeful. On this evidence, I concluded that the final and true bottom of the bear market had not been seen."

Pretty late call if this puppy peaks in August ... Wave Theory says the market is in the final wave C of an ABC zigzag correction, and timing suggests an end as early as the second week of Aug or as late as the first week of Oct (A=C when Mar6-Jun11 = Jul8-Oct12). 

Comments

[Rob]

I believe Richard Russell's bull market call is premature. My understanding is that the DJIA and DJTR (trannies) both have to surpass their January 6, 2009 closing highs and that hasn't happened yet. I am not at home now but will follow up on this with Tim Wood (I subscribe to his newsletter) who Russell considers to be an expert in Dow Theory.

[anon_aka_TERA BAAP]

RUSSELL also got bullish at the 2007 Top with his Dow Theory signal

http://www.tradersnarrative.com/richard-russell-dow-theory-buy-signal-925.html

HAHAHAHAH

as for SHERMAN and others who CRITICIZE me .. for becomeing BEAR.. I was CONSISTENTLY long here for HUNDEREDS of POINTS.. while CLOWNS kept calling for CRASH

last week i started SHORTING and it runs up 20 more points and you want to TAUNT?? this is exact reason why i have become BEAR.. on March 6th there was no BULL to be found.. now EVERYONE is BULL

I also Traded during the late 2001-2002 period which is EXACTLY like today.. the sentiment during the temporary bottom after 9/11 was "the worst is behind us" and the rally WAS relentless, with LOTS of retail long participation.. it ROLLED over in first week of January, but the dip got bought hard and there was a MONSTER 2 week rally back to the highs.. AND at that point in march 2002.. EVERYONE was bullish and long..it was considered almost PATRIOTIC to be LONG.. and the ensuing down move was VICIOUS and easily took out the post 9-11 LOWS

in addition to perfect sentiment , there are some significant time/price fib convergences as well as long-term Gann lines which indicate a major top in this area..time fibs tend to be more powerful than the widely-watched price fibs

TERA BAAP

[barood]

My time fibs are pointing for Tuesday next week for the roller over and that will be 13 days from 8th of July. Since March 6, 09, there was 5 uplegs with 13 days each and 4 corrective legs where the first two are short and the last two are long. This qualifies as Neely Symmetric and I am not sure why Neely has not discovered that. It clearly adheres to his rules of a Symmetric where almost all waves are equal in time except for two which are the last two correctives.

Uplegs = 65 days, corrective = 32 days. 50% ratio since March 6.

Neelys definition:

SYMMETRICALS (9 segment patterns)

1. This pattern emerged around 2001 as the S&P went through its transition from a bull to bear market for the first time in more than a decade.
2. Their unique characteristic is that most of their waves consume about the same amount of time and price. Two of the waves may consume a little more (or a little less) time than the others and two of the waves (possibly the same two) will consume a little more (or a little less) price than the others.
3. Of all patterns, Symmetricals all for the least price and time differences between waves.

[Ronny]

a lot of bearishness on this board!

Yelnick, what kind of probability do you ascribe to our never dipping below March lows? (By "never", I mean over the next fifty years or so.)

[yelnick]

Ronny, low. That would require the huge reflation worldwide (especially China, see my prior post) to be leading to a sustainable recovery. And we see leading economic indicators go positive right now, signaling some sort of recovery. More likely it leads to a slight positive GDP in Q4 (+/- one Q), then a drop. A W shaped recession follows. The stimulus has some impact, but we (globally) fall down again. Why? No economic recovery has come without a revitalization of real estate, and the second wave of mortgage disasters (optionARMs, HELOCs) are ahead.

From a wave point of view, the Mar lows are an odd level to end at. It is either a wave 3 end and we have 4 and 5 to follow; or a wave A end and we have B and C to follow (and D and E in a triangle or Neely Terminal pattern). Or if you are really bearish, wave 1 of a large A, with a lot more to go down. Most wavists think we get down to Dow4K/SP400 level at the eventual bottom, or lower.

[Forkoholic Serge]

>Wave Theory says the market is in the final wave C of an ABC zigzag correction,

Actually I'm thinking a brand new ABC just started on July 7th
and will end late this year

[george]

anon_aka_TERA BAAP says:
in addition to perfect sentiment , there are some significant time/price fib convergences as well as long-term Gann lines which indicate a major top in this area..time fibs tend to be more powerful than the widely-watched price fibs.
you are finally giving explanations that are
technical. this is good. keep it up.
anon, another point that i would make is the
extreme reading some stocks have looking at
several different oscillators. i have seen some
stocks with readings of 97 which is pretty high.
over 80 is considered high to many people.
george

[DG]

in addition to perfect sentiment , there are some significant time/price fib convergences as well as long-term Gann lines which indicate a major top in this area..time fibs tend to be more powerful than the widely-watched price fibs.

Wait a second, those time Fibs and Gann Lines were there in May as well, and you were pounding the table about "all-time highs" coming. Would you have us believe those time Fibs and Gann Lines just appeared over the past few weeks?

You sure are an inconsistent dude. At least when Neely changes his mind, he doesn't pull some indicator or technical jargon out of the blue and use it to justify his opinion.

Without a consistent method, trading is just akin to dart-throwing.

[Mike McQuaid]

SPX March low to the June high fib extended 261% goes to 1417 which just happen to be May '08 resistance. Given the form of the pattern from the March low til now a 1417 target is a high probability. Just draw a lower trendline to get a time target suggestion.

[Mike McQuaid]

U.S. Natural gas storage is 484 billion cubic feet ahead of the 5 yr average, representing a large advance over the average. NG prices should stay low and provide much of the energy industry and commerce needs to backbone the U.S. economy to notable growth. Technogolical advances into shale formatiom drilling and fracturing has been a supply boon. The rig count is a bit soft and producers can shut in some wells but supply dynamics have changed evidenced by the storage figures. This is a noteworthy feature for U.S. economic growth.

[Mike McQuaid]

Dear Bear Camp.
Please tell us the percentage retracement we saw off the March to June S&P500 rally and what it means. Thanks.

[barood]

Mike, I ran a neural network algorithm trained on 20 years time series for proprietary geometric random walk pricing model based on the Torque math model. I don't see any real turn around. It did not even make a new high in July. this only predcits direction of asset returns.

http://i62.photobucket.com/albums/h105/barood/PriceFromEq4_fair1.jpg

[Rob]

Further to my previous post at the top of the comments, in his weekend newsletter, Tim Wood states:

"From a Dow Theory perspective, we will have a confirmed trend change if the Transports can now confirm the Industrials by closing above their January closing high of 3717.26. Should this occur, understand it will not signal a new bull market, but rather a higher level correction within the much much larger ongoing secular bear market."

[bullion-advisor]

Guaranty Bank may collapse
http://www.bloomberg.com/apps/news?pid=20601087&sid=aJwZAT8GnmmI

[Mike McQuaid]

$WTIC, West Texas Intermediate Crude end of day continuous contract chart showing an impulse pattern off the 35.13 low. Label wave 3 at 73.90 and wave 4 at 58.72. This points to wave 5 at 83.16 as 162% of the wave 4 distance and within a few bucks of 323% of wave 1. MACD and PPO offer negative divergences across the March to June highs. This is a conservative scenario given the slope of the advance and the fundamental overlay of hydrocarbon pricing given the U.S. natural gas supply glut.

[Forkoholic Serge]

Cyclesman says "No Dow Theory signal"
http://cyclesman.info/Interviews/John072409.mp3

[Virginia Jim]

This is a repost from Slope of Hope but I hope it promotes some meaningful discussion. My speculation that the H&S Top of two weeks ago would not come to fruition (then, a highly improbable scenario) DID. For anyone going leveraged long, that was a Black Swan win. This is going to take a while to explain, but I believe there’s at least as diabolical a Black Swan that might imminently occur. I’ve been working 24/7 trying to figure out how this bear market rally was going to end and semi late last night I was near ‘capitulation’ to the bull camp. Then I had an insight that might well be a delusion. But I believe it has real POTENTIAL to be a “highly improbable consequential event.“

Here’s the bull case:
1. An inverted H&S or H&S Bottom with the head at the March 9 bottom.
2. The Prechtarian Elliott primary wave 2 theory prefers that wave 2 end in the area of the previous wave 4 of one degree of lesser trend. That would be the Nov 4, 2008 intermediate wave 4 high at about 1004. Further, Prechter’s complete impulse wave began Oct 1, 2007 and ended March 9, 2009 and the MINIMUM normal retrace would be Fib 38.2% at 1013. Preferred would be a 50% retrace in the low 1100s. How popular must the imminent bull case be when the most noted of all bears (Prechter and Russell) are at least temporarily in the bull camp?
3. Various moving average crosses.

Here’s the bear case:
1. The contrarian EW case has a lesser intermediate wave having begun about June 5 OR August 15, 2008 and ending March 9, 2009 for SPX or November 21, 2008 for QQQQs.
2. Classic pattern speculation of an expanding triangle or broadening in both SPX and QQQQs.

Bull’s case.
1. The inverted H&S or H&S Bottom is, by classic Edwards and Magee definition, simply INVALID. Volume at the right of the head should show be “notably increased”. In contrast, this speculated inverted H&S has notably decreased volume to the right of the head. It’s wide following of armchair analyst wannabes and even otherwise respectable analysts can make it as big a bull trap as was the ‘unconfirmed’ (as opposed to ‘failed’) H&S Top of two weeks ago.
2. Robert Prechter’s primary wave 2 theory has got to be the odds on favorite of all EW scenarios. By virtue of the nature of a wave 2, it should continue into the fall and reach 1013 at a minimum. I haven’t any complaint here. Prechter is, IMHO, a genius.
3. Averages cross. That’s what they do. As Taleb would say, ‘yawn.’ Its mathematics.

Bear case.
1. Very thin evidence the impulse that completed March 9, 2009 for SPX or November 21, 2008 is wave 4. It ‘looks’ possible, you can find an EW count for it. But Prechter’s view has got to be preferred. But let’s suspend that preference for additional evidence.
2. The expanding triangle, broadening top from May 6, 2009 to August 29, 2009 and cyclic coincidents. This is the meat of the case for an imminent bear wave and is the subject of the remainder of this post.
Expanding triangle.

I’m going to explain this in terms of QQQQs because that’s my preferred index but similar patterns are present in SPX. There is far greater time and fractal coincident in QQQQs apparent to me, although I’ve not studied SPX as closely. Here’s the chart:

http://www.screencast.com/users/Virginia_Jim/folders/Jing/media/ffe94334-22ee-41cd-8ef1-08125d706d5e

First note the expanding triangle at the middle right of the page (red) and the contracting triangle (also red) at the left of the page. The triangle at the left, when it completed, had projected the dramatic 2008 decline and would mark the beginning of an Elliott Wave impulse down. The expanding triangle at the right APPEARS to me is analogous to the triangle at the left, in slightly more bearish form. It is an a rare expanding triangle or broadening formation and it’s lower trendline is rising similar to an ascending triangle. [Edwards/Magee appear to condone an ascending expanding triangle at page 176 but, admittedly, I need to read more from E&M). And as we know, when ascending triangles complete they normally retrace to their beginning and then to their measurement objective.

Second, note how those triangles are near equally sectioned. At the left you will equal time periods noted as white A, B and C. At left its yellow A, B and C. If I’d noted five trend line touches of the triangle, points a, c and e would all touch the upper trend lines at each of the three vertical lines that section the respective triangles. That fifth touch of the upper trend line would occur for the final time, ideally, at August 29, 2009.

Third, note that the triangle at left DESTINES that the EW impulse out of that triangle began August 15, 2008 (in at least QQQQs), not Prechter’s October 11, 2007. That would infer the current bull market rally is an intermediate wave 4 that terminates earlier rather than a higher level primary wave 2 that matures later.

Fourth, taking the purple Fibonacci scale at the middle of the chart with the August 15, 2008 triangle as the top at 48.25 and the November 21, 2008 24.94 as the bottom, you get 39.35 as the 61.8% retrace which was exceeded by $.02 on Friday.
Fifth, referring to that Fibonacci scale at the lower right of the page and taking the bottom at March 9, 2009 25.63 and top at 39.09, those are the dimensions of the first wave of the bull from November 24, 2008 to February 9, 2009 (wave a of intermediate 4). At 39.09 wave a equals wave c. We are there.

Sixth, refer back to the five touches of the upper trend lines of the triangle at the right; May 6, June 3, and July 29, 2009. Steve Puetz “Unified Cycle Theory” cycle periods are; May 4, June 1, and July 29. Puetz Crash Window begins 6 days prior to a full moon within 6 weeks of a lunar eclipse. July 22 was a lunar eclipse and August 6 is a full moon (and lunar eclipse to boot) so July 31 is pretty significant and quite close to July 29.

Finally, I give great weight to the 2000-07 downward trend line from 2000 through three touches in 2007 (descending light blue dashed line). I commented two weeks ago that would be a major ‘attractor and this is occurring. It looks like, depending on how you draw it, it wants a touch at about 40.36. More likely, it’s a little lower. Last time there was a touch (August 15, 2008), QQQQs lost almost 50% of their value and SPX lost more than 50%.

SUMMARY: The current inverted H&S in SPX is invalid and, possibly but not necessarily, a bull trap. In QQQQs there are two triangles, the former of which had a huge bearish outcome and the later projects a similar result. These triangles have similar time symmetry and infer a more imminently bearish Elliott Wave structure. Fibonacci levels can be found to support the wave structure is completing imminently. The recent expanding triangle (broadening top), subdivides at Steve Puetz 28.66 day cycle dates. The measurement objective of this pattern is about 30.49 and, if it works, I’d expect it to be realized at about OPEX.

I’ve only noted the many coincidents surrounding the speculated two triangles (I’ve seen both independently for some time) last night and had little sleep since then. Without doubt there’s supporting and contrary indications that can further illuminate this speculation. Regardless, the weight of speculation and experts overwhelming support the opposite case, particularly with Robert Prechter in that camp. I couldn’t find a broker in several rags I read this last weekend that was other than bullish. Nevertheless, I am persuaded that this interpretation has a great potential to become the ‘highly improbable consequential event’ that defines the Black Swan.

The missing ingredient in this highly improbable scenario would be the absence of Hindenberg Omens; breadth anomalies that tend to precede market collapses. If we start to see some of these in the next two weeks, this scenario would seem to become more credible. At this point, it is highly, highly improbable. How fitting would it be for the next great bear wave to be immediately preceded by a highly improbable bear trap (the unconfirmed bear trap of two weeks ago) and a highly improbable bull trap of even greater magnitude (the invalid inverted H&S).

Make no mistake. The above is highly unlikely, but it’s an attractive thought. I don’t recommend anyone trade this, but watch for it.

Please find flaws in this. I’ll be trying as well.

And good luck, Jim

[vipul garg]

Jim,
it is a long post but an inv H&S bottom will mean that the bear market is over and no new lows can be made and that possibly there will be a rally to almost a new high.
i dont think even the most bullish of bulls will believe in that.
so that formation is not really worth considering right now.
the only formation one should be intertested in either began at october, november or march lows.
they are the ones that will work.

[Mike McQuaid]

Virginia Jim thanks for the effort on the Q's chart. Just one suggestion, park the wave label at the end of the wave and omit the columns to indicate the wave labels. It's a little hard to read as is.

[Sherman McCoy]

Hey Baapster,

You're an easy target. As Mike Ditka once said about the 9ers running up the score, As ye sew, so shall ye reap". All I hear are excuses. All I care about is making money. I do my homework, and look at this site to get retail sentiment. You guys are all clearly much smarter than me, but if you don't know who retail is, it's you.

A red color on my P&L tells me I'm wrong, and I'm wrong a lot. Most people's ego won't allow them to be wrong. What tells you you're wrong? Bob? Glenn? Mom? If you need somebody to blame for your losses, blame me. I'm the other side of every bad trade you've ever done. That's me there on the bid.

Good luck with your approach, FWIW, $/CAN is making a 5th wave low right about,.. now. Who knows, Bob may eventually be right?

[Canadian Money]

I tend to agree with this call...Possibly just a larger bear rally in play here.

For a very similar circumstance see early 2002 when the DJIA crossed above 10,000 giving a similar Dow Theory signal. Soon after the bear market continued with the Dow bottoming just above 7,000. The market may still be "on dangerous ground".

[DG]

I do my homework, and look at this site to get retail sentiment. You guys are all clearly much smarter than me, but if you don't know who retail is, it's you.

Seriously? There are about 20 sites that I can think of that get way more traffic and have far more inexperienced investors/traders posting on them. Why, in that target-rich environment, would you choose this site for retail sentiment? It's borderline retarded. So, I guess there's my answer, now that I think about it.

If you need somebody to blame for your losses, blame me. I'm the other side of every bad trade you've ever done. That's me there on the bid.

Did you steal this, like your username, from a TV show?

[DG]

If you need somebody to blame for your losses, blame me. I'm the other side of every bad trade you've ever done. That's me there on the bid.

Also, if I'm net positive for my trading career, and you're always on the opposite side of the trade from me, doesn't that mean you're net negative? How did you work it so that you're only on the other side of the trade from me when I'm taking a loss? You got some kind of magic?

For a doctor, you're sure not very logical.

[They deserve each other.]

DG

Let two idiots; Sherman McCoy and anon_aka_TERA BAAP, fight each other.

They deserve each other.

[DG]

Sure, no problem. I said my piece.

[Bull is back!]

New bull market is here!

Stay long and strong!

[Account Deleted]

DG is the biggest NEELY CHAMCHA I have ever seen

[Time Monks Web Bots]

Time Monk Web bots predicted crash of 10/2008 to the exact day 6 months in advance.

Check out what the Web bots are predicting for 2009...

http://www.youtube.com/watch?v=jyPzBo_ukmE

[VB Shit]

VB CHAMCHA

You make India a shit country.

[Sherman McCoy]

I'm a lover, not a fighter, I really love you guys!

Great piece from Dennis Gartman:

http://www.bloomberg.com/avp/avp.htm?N=av&T=Gartman%20Says%20Commodities%20Rise%20Signals%20Recession%20Ending&clipSRC=mms://media2.bloomberg.com/cache/vd.lMdbJRlOI.asf

Best lines, "Just because the market is up 11 days doesn't mean it can't go up 13.... The market is always right....I learned long ago, not to fight the trend, getting the trend right is enough..."The market is going to continue to be up until it stops"

Like me(probably a coincidence), he's looking for parity on the Loonie. How much easier can I make it for you?

[DG]

VB,

Since you're the biggest CHAMCHA overall, I still will defer to you in the ways of CHAMCHA-tude. I'm sure you can teach CHAMCHAs everything a thing or two.

[DG]

VB CHAMCHA

You make India a shit country.

Posted by: VB Shit | Monday, July 27, 2009 at 12:47 PM

I know so many good Indian people that I can only conclude that VB is the Indian equivalent of "the ugly American".

The guy's clearly got nothing to offer except for inane and ill-founded criticism. Idiots like him think if a trading method isn't perfect, it must be terrible, as if those were the only two alternatives.

[G]

Flame wars are bullish and symptom of socionomic greed

Stay long

[Upstart]

S&P 1120; that's where Carl Futia looks for a top that leads to a 100-150 pt. correction. He looks for the bull to go into late 2010, and higher than most people imagine.

Obviously, there will be no end to the upward correction in August, or September for that matter. It would not be big enough in time or price to correct the decline. A top will only be the end of the first leg of the correction. If it had turned down at the June top to test the low, the ended rally would still have only been the first leg up of correction, not all of it.

[DG]

Flame wars are bullish and symptom of socionomic greed

If this were the case, the bear market of 2000 to 2003 could never have happened, since I personally participated in many flame wars during those years.

Man, is there some kind of astrological explanation for all of the moronic comments lately?

[Q]

"Man, is there some kind of astrological explanation for all of the moronic comments lately?"

Yes, we must be close to a top.

[DG]

Obviously, there will be no end to the upward correction in August, or September for that matter. It would not be big enough in time or price to correct the decline. A top will only be the end of the first leg of the correction. If it had turned down at the June top to test the low, the ended rally would still have only been the first leg up of correction, not all of it.

I'm not sure what it is that makes any of these assertions "obvious". I'm not saying I'm write to think this, but each of these assertions is, at the very least, debatable and not "obvious" at all.

[Thomas Jefferson]

We hold these truths to be self-evident: That, had the markets turned down at the June top to test the low, the ended rally would still have only been the first leg up of correction, not all of it.

[George Washington]

Glad to see you weighing in, Thomas. My turn.

I cannot tell a lie: Had the markets turned down at the June top to test the low, the ended rally would still have only been the first leg up of correction, not all of it.

[anon_aka_TERA BAAP]

DG..

Wait a second, those time Fibs and Gann Lines were there in May as well, and you were pounding the table about "all-time highs" coming. Would you have us believe those time Fibs and Gann Lines just appeared over the past few weeks?

i certainly believe that ALL-time highs are coming..because this flat correction wave 2 since 2000 will lead to the wave 3 UP.. BUT the STRUCTURE of the ascent since the March temporary bottom , CHANGED with the pullback to 869 and the SHARP RALLY SINCE.. this is NOT the character of BULL markets.. which tend to be SLOW rises with SHARP pullbacks.. now we have SHARP rallies accompanied with HUGE bullishness with sentiment and structure a perfect match as the rally before the '02 bottom (as well as other similar fractals).. THIS ADDS WEIGHT TO THE FIBS because you cannot view fibs in a vaccuum but as a piece of a much larger puzzle which unfortunately Neely has missed

SHERMAN..

HAHAHAHA

you are a CLOWN and these markets are going to teach you a priceless lesson which you will remember the rest of your natural life..

TERA BAAP

[teaf]

is anyone counting the 666 lows as a 3-3-5 flat off the 2000 highs? any reason you can't count it that way. by Prechter's definition it looks pretty good.. it's also basically the .618 from 87 low to '00 high... the thing that always bothered my friend (the best Elliottician i ever saw) about the 2007 top is that it was a 3 wave move into the high.. well if that '02-'07 rally was a B wave then it looks pretty good that we just finished a flat... comments?

“A flat correction differs from a zigzag in that the subwave sequence is 3-3-5. Since the first actionary wave, wave A, lacks sufficient downward force to unfold into a full five waves as it does in a zigzag, the B wave reaction, not surprisingly, seems to inherit this lack of countertrend pressure and terminates near the start of wave A. Wave C, in turn, generally terminates just slightly beyond the end of wave A rather than significantly beyond as in zigzags.”

[DG]

Jim,

Obviously, you did a lot of work on that. I have a price target on the SPX around the 1050 area in the very short-term and that should cap the rally from the March lows. Time-wise, this should happen very quickly. This is based on my read of current SPX action using NeoWave concepts and methods. I expect new lows beyond that.

[DG]

I should add that my scenario would be invalidated by a move below SPX 965.95 on the cash index.

[DG]

is anyone counting the 666 lows as a 3-3-5 flat off the 2000 highs? any reason you can't count it that way.

I would urge you to consider the question, what is it that makes an Impulse (a five-waver) valid? It has to be structure, right, it can't just be the amount of price covered (as Prechter asserts in his definition of a Flat) or the time it takes for it to unfold, right? If that is the case, what are the rules for this structure and to what extent does the move from the 2007 highs meet them? For that, Prechter is not a rigorous enough guide. I do not consider that move a Flat because the move down from the 2007 highs does not meet Neely's "Essential Construction Rules" for Impulsive patterns, nor does it meet the NeoWave time rules for a Flat.

[DG]

BUT the STRUCTURE of the ascent since the March temporary bottom , CHANGED with the pullback to 869 and the SHARP RALLY SINCE.. this is NOT the character of BULL markets.. which tend to be SLOW rises with SHARP pullbacks.. now we have SHARP rallies accompanied with HUGE bullishness with sentiment and structure a perfect match as the rally before the '02 bottom (as well as other similar fractals).. THIS ADDS WEIGHT TO THE FIBS because you cannot view fibs in a vaccuum but as a piece of a much larger puzzle which unfortunately Neely has missed

Actually, the structure of the move up from the March lows has been and remains Corrective, so there has been no change despite the dip in June/July. That you didn't see that from the beginning is more a reflection of your own bias and lack of rigor in your wave counts than anything the market has done to "change". I don't touch "sentiment" because no one can adequately quantify it or relate it to wave structure reliably enough to trade off it. Even the VIX is driving traders nuts by continuing to make new lows. As far as your last statement about "adding weight" to Fibs because of the change in structure, as I said, there has been no change in structure. Price behavior has been perfectly consistent with the structure Neely has been counting in the market for a few months now, and can be integrated into his wave count from the October/November 2008 time period, although he clearly erred in his call for a top and the short-term structure has not been completely clear to him for a while. We have been trying to work through what it might be on the Neely blog and have come up with some ideas, but the "big picture" call for a top nearby remains in place.

Also, I'm not quite sure why you would mix fractals and wave theory, since wave theory depends on structurally-defined standardized patterns with specific relationships between each leg of the pattern, whereas fractals can be either only part of a standard wave theory pattern or can be combinations of multiple standard patterns (in whole or in part) or a standard pattern and part of a second standard pattern. I have always had that issue with the entire fractal approach to trading, as opposed to the Elliott/NeoWave approach. Anyway, despite the fact that wave theory is fractal, I would not mix the two personally.

[teaf]

i don't get what you are saying about structure - you have arguably have a 3-3-5 from 2000

are you (or Neely) saying that we did not impulse 5 down from the 2007 top (granted last wave looks like a 3)? and that 9 years and 55% of the entire market are not enough of a retrace?

i don't believe in Prechter's big picture calls just pointing out that the most bearish guy on the planet's (next to Neely)definition is pointing to a massive rally that NO ONE believes is possible because they are looking in the rear view mirror

even if we are doing ABC up we are likely going to the .618 at 1230.. i don't see how anyone who follows Elliott is trying to short an impulse out of a 3 wave correction. your 1050 target is likely 1 of C

[Mike McQuaid]

teaf, I count SPX 666 as a flat off the 2000 high. The March '09 low was a reversal. You are the only poster here, besides me, who's made a case, in technical terms, for it.

[DG]

are you (or Neely) saying that we did not impulse 5 down from the 2007 top

Yes, the internal subdivisions and extensions do not adhere to the Impulse rules.

i don't see how anyone who follows Elliott is trying to short an impulse out of a 3 wave correction. your 1050 target is likely 1 of C

It hasn't been an impulse, since, again, it doesn't follow the Impulse rules. The move off the bottom, as of right now, counts best as a Double Zigzag with a Running Correction x-wave. First Zigzag was ~60 points and the second Zigzag is in progress and should be 1.618X the first, or around 100 points. Since the Running Correction x-wave ended around 950, that gets the 1050 target. My count has the b-wave of this second Zigzag ended at the lows of today's final hour. As I mentioned above, I'm wrong if cash goes under 965.95. Or, more accurately, I can't be right if cash goes below there, because cash could stay above that level and I turn out wrong anyway. If I wanted to keep a super-tight stop on the trade, it would be at 977.66, or 1 tick below that last hour's low, which we shouldn't go below if the b-wave was what I think it was.

[anon_aka_TERA BAAP]

DG..

Actually, the structure of the move up from the March lows has been and remains Corrective, so there has been no change despite the dip in June/July. That you didn't see that from the beginning is more a reflection of your own bias and lack of rigor in your wave counts than anything the market has done to "change".

Hasn't NEELY himself said something along the lines of (this is secondhand info) 'if this rally goes higher, it leads to an even WORSE bear market later?'..i dont expect you to answer since many here are not "Subscribers"..however isnt THAT an example of someone changing their interpretation of price structure??

the structure has definitely changed with this rally and incredibly i think Neely is correct (for different reasons) but conceptually that rallies LIKE THIS are NOT symptomatic of bull markets or sustainable uptrends.

Also, I'm not quite sure why you would mix fractals and wave theory, since wave theory depends on structurally-defined standardized patterns with specific relationships between each leg of the pattern, whereas fractals can be either only part of a standard wave theory pattern

fractals (historical patterns with similar structure) are invaluable insofar as they are MANIFESTATIONS of wave theory..i.e., waves are the classroom and fractals are the practical lab.. proper identification of appropriate fractals is more complex than can be discussed here..because the precise relationships between the open/hi/low/close in terms of BOTH PRICE and TIME of the series must be evaluated..i have developed some algorithms for that..

fractal analysis would see that the near term structure (e.g., the rally off the march low) is now reconciled with the larger move off the Oct 07 top and indicate that we need one more move down to a target of maybe 450-500,..the clearest context is the weekly chart into the 2002 bottom, but there are others as well..theres an outside chance we could make a fast move over 1000 but it needs to happen soon at which time i would add to short

[DG]

Hasn't NEELY himself said something along the lines of (this is secondhand info) 'if this rally goes higher, it leads to an even WORSE bear market later?'..i dont expect you to answer since many here are not "Subscribers"..however isnt THAT an example of someone changing their interpretation of price structure??

The exact nature of that modification is slight compared to going from "we have seen the lows and are on our way to new highs" to "we will see new lows", as you have done. Neely's change is much more cosmetic and actually leads to quite the same conclusion, although the market is forecast to take a slightly different path to that conclusion.

the structure has definitely changed with this rally and incredibly i think Neely is correct (for different reasons) but conceptually that rallies LIKE THIS are NOT symptomatic of bull markets or sustainable uptrends.

Bull markets can come in a variety of shapes and sizes. What doesn't make the move from March a "bull market" is the overall context of this single leg. The pace of change or, to the extent it can be quantified, sentiment, is of less overall value to determining whether this is a bull or bear move, at least partially because those only matter in the relative context of the most recent market action. The fact that the move off the low was the fastest percentage gain move since the 1930's didn't make it a bull market move because this leg isn't situated in a bull market context, although for those who have held long since March, it has led to significant gains.

fractals (historical patterns with similar structure) are invaluable insofar as they are MANIFESTATIONS of wave theory..i.e., waves are the classroom and fractals are the practical lab.. proper identification of appropriate fractals is more complex than can be discussed here..because the precise relationships between the open/hi/low/close in terms of BOTH PRICE and TIME of the series must be evaluated..i have developed some algorithms for that..

That's fine, but it leads to a conceptual difference between any kind of fractal analysis and wave theory. Neely writes that "The Theory indicates man, and his markets, continually chart new territory and types of behavior. It stipulates that at no point in history is a market's action or psychological environment identical to any other period. Similarities are allowed, but not exact duplication. This can be a problem for traders and especially 'system' developers, who endeavor to formulate strategies based on historic price action and behavior. Unlike most systems and forms of analysis, the Wave Theory warns the analyst to look for change and warns him when and where a market will not behave as it has done in the past...A form of analysis which explains, categorizes and structures progress, not repetition, is needed. That is what the Elliott Wave Theory is capable of doing." And the whole "theory vs. practicality" comparison is overblown. As the saying goes, "There's nothing so practical as a good theory". Once you have memorized the rules of the theory, it is quite simple to generate practical trading ideas. It's the rule learning-curve that most seem to want to dispense with. The wave theory isn't meant to be applied to some Platonic ideal market, it's meant to generate trading ideas in broad-based, publicly-traded markets and supply the trader with robust risk management practices to accompany the theory's forecasts.