Stocks Should Decline Then Enter Final Rally

The sharp pop yesterday and fade since pretty well confirms the scenario noted a few posts ago of an end to a wave iv triangle with a thrust up, and now the end of that wave v thrust.  A week long decline should follow.  A drop to the range of SP933-950 is likely (50% to 38% retrace).  The STU sees the whole pattern from Mar6 as a double zigzag: the first (called wave W) went to the Jun11 peak, an X wave correction followed to Jul8, and now wave A of the second zigzag (labeled Y) has probably just ended.  The week-long decline will be wave B, and a final C wave to higher highs awaits us later in the month.

The surge in the Naz above 2000 reflects a return of speculative sentiment, as the Naz volume has greatly outpaced the NYSE volume.  See chart, courtesy of EWI (which they attribute to Alan Newman at cross-currents.net). 

The big drop in the USD today presages a bottom - probably about the same time this B wave ends.  The Dollar Index came out of a fourth wave triangle with a thrust down and when this wave 5 ends, a huge rally should ensue.

Comments

[Fool Me Once]

Plausible. I see a little celebrating, but not the kind I'd expect before a huge drop.

It might be stomach wrenching trying to play a top. It might take months or years or never come.

A lot of people --myself included-- lost a lot of money following Prechter's predictions circa 1997-1999. Probably many others lost a bundle following his predictions from 1987-1999 or 2002-2007.

I am pretty disenchanted, but Prechter's only potential saving grace is if he's right about the magnitude of the crash. So far, it hasn't happened. But I'm willing to give him a few more years if it really is the sort of dire event he thinks.

He made a lot of remarks about eating his hat, admitting he doesn't know what he's talking about, etc if the market doesn't crash by 2001 or 2003 or whatever.

As far as I know he never ate his hat!

Call him a genius or a charlatan. At the very least, he's got serious integrity problems.

[Forkoholic Serge]

Today's Tiger was all about gapdowns/gapaways. Some big one:
MSFT, FSLR, YHOO, LVS, AMZN, BCO, AGP, SYNA, SYMC, AKAM, LVLT, OCR, SPR, LEAP, AIQ, FBP, IRM, AMMD, GMR, CATY, ITRI, GHL, CSFL, ICAD

http://tfnn.s3.amazonaws.com/TOS073109.mp3

Two out of 3 of my Tops indicators rolled over, signaling
some sort of a top maybe in place. the 3rd had stayed in divergence mode since 22nd
Looks like $ECP topped as well

[DG]

I'm sorry, but unless I'm reading it wrong, that count is absurd. Wave 1 of c larger than the entirety of a?

[yelnick]

DG, if you referring to STU count, this has been wave A of an ABC zigzag (535). We have begun a three-wave B and will have a final five-wave C to follow.

[da bear]

anyone think that the stock market could top on September 3rd, around Labor Day. The top tick in 1929 was the first week of September. maybe we pay homage to that important date -- exactly 80 years later.

i agree with that dollar count though. looks like it is in a fifth wave down, we should know in the next couple of days. that should end on a mini-panic spike down. on the flip side the stock market should rally until wave 5 down in the dollar is completed. then the stock market will start Big Wave 3 down.

not sure about gold. the important price is $960. if gold gets above that then it can rally with the stock market for a few more weeks. silver has gone up more than gold in percentage terms recently suggesting that it is the end of a precious metals up move instead of the beginning. gold will hold up better than silver on the next decline.

i think the VIX will make a low that is higher than the low reached a few months back.

oh, one more thing. EWI Financial Forecast mentioned the VIX and thinks that it will go lots higher soon when everything crashes. i have looked at it for awhile and i think that going into last fall were a series of waves 1 and 2's. then the big 3rd wave higher into the fall bottom. the correction since then has been wave 4. the upcoming rise in the VIX should then be the wave 5. anyone else have a VIX wave count?

da bear

da bear

[DG]

yelnick,

I meant that labeling the bear from 2000-2002 as 'a' and the bull from 2002-2007 (their dating scheme is different from Neely's, as you know) as 'b' and the bear from 2007-March 2009 as 1 is absurd. I'm guessing that means they think we're in a Flat and yes, I understand that they mean to say that we are in wave 2 of c of that Flat, but the wave 1 of c of the Flat being larger than the entire wave 'a' is way out of proportion to anything that I think makes sense. The essence of a Flat lies in the similarities of each leg.

[Mike McQuaid]

DG, suprise, I agree with you on the above chart labeling. That circled 1 is way out of place. They pulled that labeling before and it got challenged on this blog then too. If it's a 1 wave down where would 5 end? The chart can only go to zero, and wave 1 gobbled up 910 points! Even 1.618 times that distance would go to 176 on the S&P500! Forget that it's a bogus chart. It's a reject. It got labeled by a monkey!

[vipul garg]

DG,the only time when wave 1 can be longer than wave a is when labelled by STU!!
prechters long term count is for 400 on dow(unless he laters admits it to being a typo error and replaces dow with sp500).so all his labels are pointing to that.

the hunt for right logical count continues.

[anon_aka_TERA BAAP]

Next WEEK..we begin the CRASH

SHERMAN.. please return and EXPLANE what went wrong

and how u plan to REMANE solvent

and FEED the KIDS

[Bollinger]

This might be a count that some people here subscribe on:

http://1.bp.blogspot.com/_TwUS3GyHKsQ/SnIKR_K9x2I/AAAAAAAABOM/jwz_PnDV5J4/s1600-h/daily.png

Then the top of this bear rally is forecasted around 20 September.

[Forkoholic Serge]

HSI: Poor Timmy can't sell his house
http://www.thedailyshow.com/watch/wed-july-29-2009/home-crisis-investigation

[Forkoholic Serge]

>I'm sorry, but unless I'm reading it wrong, that count is absurd. Wave 1 of c larger than the entirety of a?

Yes, you're friggin idiot!
oops sorry I meant to say "u reading it wrong!" ;-)
just teasing ya :p

http://forkoholic.com/images/spx1966.jpg

[teaf]

the other problem is that the final move into march low was a 3

[DG]

They pulled that labeling before and it got challenged on this blog then too.

I didn't realize that. This is really one of the few times I've actually taken the time to look closely at their count.

There is one possible way it could work (and it would still be a stretch), which is that if the c wave turned out to be a 1st Wave Extension Terminal, with wave 2 retracing a very significant amount of wave 1.

I'm sure that's what EWI means. Yeah, right.

[Upstart]

One thing about EWI: Two or three years ago, Prechter showed a chart with Elliott count that he keeps of the number of subcribers to the Theorist since he began. At that time "he" was in the 2nd wave pullback within a final multi-year 5th wave, thus due to begin the 3rd of the 5th. I even kept that in mind at the 2007 high, that it could mean that he would soon be spot-on. (Sadly, I didn't act on it because of all the wrong calls leading up to it.) So he would still be within the 3rd wave for some time, if you want to draw any conclusions...

[yelnick]

DG, got your point. I expect their count to shift to a completed flat from 2000 - 2009, and an X wave from Mar6 to 2010, and then the next leg down, another three-waver. Or, this might break as a triangle (their perspective) or a terminal (Neely's perspective) where we are in leg C / T3.

[tony123]

Hasn't Neely screwed enough? Go with someone who has been nailing this market time and time again - http://thinkingtrades.com

[model portfolio; thinkingtrades.com]

Tony123

It is obvious that an engineering graduate from India (thinkingtrades.com)is fairly inexperienced trader. You cannot rely on an inexperience trader who just made phony money from model portfolio. What he did with his model portfolio is something nobody would do with real money/risk management.

"Yesterday’s 5% sell off in China reinforces my view that eventually this rally will fail."

What a surprise, ha?

[gambler]

During the last few years, a weaker dollar has been correlated with a strong stock market. Minyanville has been commenting on this for quite a while. Witness how the dollar peaked this year in early March right when the stock market bottomed. A drop below this year's low in the dollar will likely signal the last leg up of the stock market for the year. After this the dollar will likely begin a big rally and the stock market should head south. I expect this turn of events may not happen until late August or mid-September. I also fully expect the bond yields to revisit their Dec 2008 lows during the next leg down of the stock market.

[AJ]

Mike/Vipul

The only way that can be a 1 and right is if it is the first downleg of a diagonal triangle wave c, as wave 1 or A of the DT is often the longest - in fact I suggest that because no-one else is talking about it, it is probably the one - ssshhhh, don't tell everyone.
This second wave of the DT will top in May 2011. Up into Sept/Oct for this leg A, drop into 3rd quarter 2010 for b leg and then rocket up into May 2011 in c to finish wave 2/b.

[vipul garg]

AJ,
STU labels it as wave 1 of a trending impulse.so by them it is not a diagonal triangle.so if they want a diagonal triangle , they ll have to stop making it a trending impulse.

lets forget stu , and say this is wave 1 ending at march 09 low.so why may 2011 as a turn date for wave 2?what are the further projections.?

[?]

Model Portfolio,

I dunno about thinkingtrades.com because he seems to be giving my man Lenny Dykstra a run for the money. I hope that thinkingtrades.com breaks Lenny's 84-0 run.

[When thinkingtrades.com makes money by taking short side,let us know. Then we will think abo]

?

thinkingtrades.com only took long side so far. I do not think he knows stock markets also go down (as he were shocked by Chinese market).

He bought "TONS OF" O-T-M call options to maximize his (model) capital of 10K-20K.

When thinkingtrades.com makes money by taking short side,let us know.

Then we will think about him.

[They come and go.]

This is not the first time.

During the dot.com bubble there were numerous inexperienced traders pretended like genius.

They all disappeared as dot.com melted down.

[?]

I am thinking that thinkingtrades.com will do a Lenny. If the position goes against him, he will average down.

[Watcher]

"anyone think that the stock market could top on September 3rd, around Labor Day. The top tick in 1929 was the first week of September. maybe we pay homage to that important date -- exactly 80 years later."

da bear,

Earlier this year I began looking to see if a version of of ratio analysis might apply not just in the markets, but to historical events generally. If you find 2 events that appear to involve a coincidence, then it is more likely that a 3rd event will be related in time. So...the fact that the 1929 stock market high and Germany's 1939 invasion of Poland were both on or about September 1st is a coincidence worth looking at. If you roll it out to 1949, you hit the 1st Soviet test of nukes, which arguably began the cold war. By continuing to roll this cycle down through the years, there are often BEGINNINGS of ominous events (to play out over years) that occur at least within a few weeks of September 3rd, if not more precisely. Or, if nothing on the world geo-political scene occurs, then the energy seems to be expressed in BIG DESTRUCTIVE STORMS. I was not necessarily cuing this to the markets. In any case, September 3, 2009 (give or take a few weeks) is worth watching.

[that's not what happened.]

If they were smart enough, they would have taken profits before the melt-down.

But that's that what happened to those "genius traders".

[MHD]

DG
Neely's worst case was 375-400 on the S&P. It will be interesting to see his new view on the downside as he says a break of 956 will mean a bigger disaster for the markets. Maybe he's with Bob on the potential lows now, and will agree on the 1 labeled on the chart above?
Just a thought!

[da bear]

i am keeping an eye on bicharts.com to see if the S&P 500 can get above and stay above 1,000.
if that occurs then the last leg up is still in progress...

da bear

[Sean]

Da Bear, I have been enjoying your posts.

Where do you see this USD latest downleg completes? I see around $74.5, based on Mish and Daneric's elliot wave.

My own guestimates -- http://www.screencast.com/t/Jk287rA8B2E

http://danericselliottwaves.blogspot.com/2009/07/long-term-us-dollar.html
http://globaleconomicanalysis.blogspot.com/2009/07/ewave-count-on-us-dollar-suggests-move.html

[Brian]

The week long decline is off to a bad start....

[Neely the Guru]

In 2000, Neely changed the name of his research and advisory firm to NEoWave Institute to differentiate his scientific Wave analysis technology from orthodox, subjective Elliott Wave analysis, which is frequently nebulous, inaccurate, and constantly fluid.

Aliso Viejo, CA (PRWEB) June 16, 2009 -- Glenn Neely, founder of NEoWave Institute and prominent Elliott Wave analyst, today announces a startling prediction: The S&P 500 is forming a major top in June, which will be followed by a large decline, eventually pushing the stock market to record lows for the decade.

"Technically speaking, according to NEoWave a correction began at last October's low; the March-June rally is the final leg of that correction," Neely explains. "The March-June rally is now ending, allowing the bear market to resume. During the next six months, the S&P will decline 50% or more, breaking well below 500!" Currently, the S&P is hovering around 917.

Glenn Neely is providing this information not as a specific trade recommendation but as a general public service announcement. A prominent Elliott Wave analyst, Neely was recently recognized in Timer Digest's May issue as the #1 stock market timer for the past 12 months.

[Eventhorizon]

DG's comment about EWI / STU's wave 1 of c down resonates with me. I thought EW counts had to be well proportioned. This would not be possible in this case. More likely, if a bearish count, this is the first of a series of threes down - anyone know how frequently flats are featured in combinations?

Mike McQ - your argument that "it cannot be a wave 1 down because the index cannot go negative", can be answered by the argument that you should be relating percentage moves, not points. In general you don't need to bother with minor degree counts because the difference in percent or points is small, but for higher degree counts it seems you would have to use percent. I am not disagreeing with you that your count is wrong or that EWI is right, just that the absolute point size of the move argument can be handled.

Finally, I am bothered by the EWI count and tone right now because I remember the exact same stuff during what they now call wave b. This was originally wave 1 down of the crash to end all crashes. Then the wave 2 abc became a wave 2 double zig-zag, then a triple zig-zag and finally, 750 points and new all time highs were reached, the wave 1 down count was retired and it became waves a and b with the crash to end all crashes still in our future. Deja Vu all over again?

[avenger]

In 2000, Neely changed the name of his research and advisory firm to NEoWave Institute to differentiate his scientific Wave analysis technology from orthodox, subjective Elliott Wave analysis, which is frequently nebulous, inaccurate, and constantly fluid.

That brilliant call proves, of course, NeoWave is never any of those things.

[Mamma Boom Boom]

Taking a closer look at 'Green Shoots':
http://www.bushongbusiness.com/webbbs/index.cgi?noframes;read=18181

[tony123]

Top callers getting ruined. No one calls it better than http://thinkingtrades.com. Transparent and no nonsense calls.

[Tony123 stop your false advertisement.]

Tony123

stop your false advertisement.

[DG]

Posted by: MHD | Monday, August 03, 2009 at 09:17 AM

MHD,

Neely's potential alternative scenario really just drags out (in time) the move down to those levels you mention. I think he calls it "worse" because things are going to suck longer and it will be psychologically more draining.

[thinkingtrades.com]

If he believes in himself, why doesn't he trade with REAL money?

[DG]

That brilliant call proves, of course, NeoWave is never any of those things.

Posted by: avenger | Monday, August 03, 2009 at 02:14 PM

NeoWave has made strides in eliminating those characteristics from market analysis. There is no question that Neely's calls have often been at odds with the Elliott Wave Institute's outlook and since I don't know of any outfit more closely associated with Elliott Wave than EWI, I can understand why Neely would want to "stand out from the crowd" by adopting a different name. That he has been right more often than EWI also shows that he was right to try to carve out his own niche. This despite being just one person, while EWI has a team of analysts (I don't know how many, but it's more than 1).

He got this call wrong, and it's unfortunate because he did go out on a limb making it, but I would still put his public track record against almost any other public prognosticator out there. The ultimate irony is that the trade he entered on the basis of that call was actually profitable because he wasn't so stubborn as to stay in it when the market didn't act "right". This did provoke some angry reaction from at least one subscriber, but the bottom line is that anyone who took that trade exactly as laid out still would have made enough to pay for 3 years of NeoWave S&P forecasts.

[Kipton]

Neely needs to spend more time and efforts. Without a stella performance he will lose impatient subscribers.

[Rob]

I don't subscribe to EWI. I was under the impression they were calling this rally as wave [2].

Posted tonight on financialsense.com and safehaven.com is an article entitled Bulls Rush In by Joseph Russo of EWI. He is calling for a potential 78.6% retracement of the entire decline for the DJIA, bring it to in excess of 12,500. Russo is dissenting from the primary wave 2 rally thesis.

Has anyone seen this article? Please feel free to comment on it as his discussion doesn't make much sense to me.

Hochberg was on financialsense a week ago and it is archived. I guess I could listen to what he has to say, but an update of what EWI has to say today would be appreciated.

[Rob]

Well I went back and listened to Hochberg being interviewed by Jim Puplava on financialsense on Thursday, July 23rd. It is clear Hochberg believes we are primary wave 2. He talked about Prechter advising clients on February 23rd that he expected a sharp rally with targets of DJIA 9000 to 10000 and SPX 1000 to 1100. He stated that the rally is probably not over yet. Some of the sentiment indicators are getting up there. As we top, all markets should roll over one by one.

Consequently, I don't know where Russo is coming from but one would think that EWI staff should be on the same page in their various articles posted on the internet.

[da bear]

yeah EWI has been calling for DOW 9,000 to 10,000 for awhile.

if last year is any guide, gold will top first. maybe the struggles with $960 show that gold is topping NOW.

da bear

[Eventhorizon]

Rob,

Russo has his own site, called Elliott Wave Technology (if memory serves). As far as I know he has nothing to do with EWI.

[Enigma]

No disrespect to anyone and their trading strategies, but no one knows when the music will stop and we can't just hover over a chair. A forecast is something to use to develop a plan, not to trade...am I wrong when I say this? I don't know, when the trend changes, then change your trade and evaluate the pattern. We should be chameleons as we trade, shouldn't we? Very few are lucky to pick tops and bottoms. I was on a trading website the other day and people still have shorts on between 890-920 they freely admit because they are waiting for Prechter's Wave 3. They could potentially be waiting at the train station for awhile...

[$99 subscription]

thinkingtrades.com
[email protected]

You stated "It will be clear like day and night when it’s time to change the strategy."
I think you are naive to say that.

Why don't you tell us when it's that time. If you are correct, I will give you $99 for the subscription.

[steal]

I thought Neely's subscription was expensive. Who pays $99/month for a guy with no experience who has been doing nothing but buying out of the money call options and cheap ETFs?

[DG]

A forecast is something to use to develop a plan, not to trade...am I wrong when I say this?

I remember hearing about how pilots use flight plans. Apparently, the flight plan is an extremely detailed document that must be completed before a plane can take off. From the way it was described to me, a typical flight plan can take many man-hours to complete. Yet, as soon as the wheels leave the runway ground, the captain begins to make modifications to the plan. I think that is analogous to the relationship between forecasting and trading.

I also think, regarding people who are short from 890-920, that those people just might be trading on a different time-frame from those who are currently long. You say that those people may be waiting a long time, but to them, your "long time" is "soon enough". A good chunk of the flames that go back and forth on trading sites would cease if people would just be more specific about their time horizons for a trade.

[MHD]

Most, if not all Ewavers that I follow say this is nothing more than a bear market rally that will end soon. Since all agree that the worst is yet to come, this will be the final test for Elliott Wave theory in my opinion. If Ewavers turn out to be wrong, and the worst is over, the "theory" will be dumped into the garbage can. Bob had continued to forecast doom and gloom as the market shot up fromm the 2003 lows. He had the wrong count big time, but now he has almost every Ewaver on his side, so this should be interesting.
I believe that if turns out to be a new bull market it will be because of the bulls, and government spending at obscene levels. The bears are at a huge disadvantage. It's not a "free market", otherwise the bears would have won long ago.
So if it is a "V", and you are a bull, you can thank the aholes in Washington, but you should advise your children to stock up on KY jelly as they will need it badly!!!