Final Surge!

Today was quite a surge day.  The STU thinks we should see a relatively brief affair with a sharp reversal, but first it has to run.  Neely told his traders to stand back until at least 50 SP pts have run up.  This looks like minor wave 1 of C, which should break in five waves.  If I had to paint a scenario, it would be this:  a spillover up Mon am as the weekend herd jumps in, followed by profit-taking; this is minor wave 2.  It should be over quickly.  Then the big surge up in minor wave 3, powering through Dow9700 towards Dow10K, which it will probably not make.  Then an annoying plateau in minor wave 4 testing our patience near the fable five-digit level.  Then BAM! the final spurt up through 10K to the 50% retrace of Dow10330. If this happens fast enough (six trading days) I could still win my bet.  Of course, this is just one of a myriad of scenarios.  We will know when the final top is in: the reversal will be violent, steeper than the run up. 

Comments

[da bear]

i think that this rally would correlate to another leg down in the dollar index (i think the final waves 3,4, and 5 down of this A, B, C decline. target of 72.

gold should run up too then. should hit $1,000 to $1,100. that would be a B wave high for gold.

da bear

[yelnick]

da bear, you may be right, at least directionally. rather than rallying, the USD has come down to its recent low, and seems poised to break even lower. the end of the rally may coincide with the rebound of the USD.

[Miguel]

yes guys
a lot of things are coming together now.
i have read here in this blog a few days ago a projection by a marrocan analyst where he compares the one day charts odf 1929 with a week chart from now.It mimics the drop and the bear market to the max and it projects the end of the suckers rally on sept 5th.Very remarkable.
Another one here saw a ver clear 70 day cyclus (changing the course of the trend of last part of the cyclus on SP with sept 11(!!!!!!) as the turning point.( do we get another surprise from our friends of al quaida?)
If gold gets its first peak (1080?) helped by seasonal influences it would fit with other projections calling for a run (after the drop now to probably support lines) at the end of the year leading to a top in feb 2010 due to fears of inflation just before the final curtain after governments understand that the projections they have made for baancin their bokks will not hold.
I see the dollar dropping to 75 in a bear trap now before shooting up
NOW all this fits.

[benoit from france]

i have read here in this blog a few days ago a projection by a marrocan analyst where he compares the one day charts odf 1929 with a week chart from now.It mimics the drop and the bear market to the max and it projects the end of the suckers rally on sept 5th

chart :
http://www.belkhayate.ma/fr/detail_act.php?id_act=134

[Hank Wernicki]

Scanning the Dow 30 there are 4 instances of the current July - September Rally

The most notable is the 7/8/32 bottom that peaked on 9/7/32

The current July bottom was on the 8th also and 61 days brings us to a Monday September 7th Top

[Miguel]

Bradley turning point also on sept 14th

[Jacque]

I think we have 3 more weeks of runup, with 1050 as a top. IMO, avg in shorts SLOWLY!

[da bear]

Hank,

in June 1929 there was a short-term low that lead to the big top in September of that year.
interestingly enough, the rally that year looks similar to our current rally.

Monday September 7th is Labor Day.
so the friday before would be the 4th.
the 1929 market topped on September 3rd.

da bear

[Hank Wernicki]

Yes, it's coming !!!

The next weeks ... be prepared

[Jerry B]

Sorry to burst your bubbles (or not burst them!) but the bull market is alive and well and will charge past SP500 1200 in short order. You will not see a drop below 950 in your lifetime, even if you are lucky enough to live for another hundred years.

My reasoning is simple: First, I expect legislation to mandate that funds keep a large percent of their assets in equities. Second, I expect manufacturing in the US to pick up as environmental regulation finally comes to China and levels the playing field. Third, I think the pessimism has been utterly overdone. Just look at this site. Terms like "Greater Depression"? Come on, people. That's cult-talk, not good, reasoned sense.

[B]

You will not see a drop below 950 in your lifetime, even if you are lucky enough to live for another hundred years.

Jerry B
You lack something.. experience or brain.

[B Gratefull]

without the Jerry B posts of the world and the reasoning behind them there could be no tops!

[Sherman McCoy]

Dear Miss B-

You sure are a nasty of work. Did your parents beat you as a child? One would think people(I use that term generously) like you would be a little kinder to other points of view, since you don't learn anything from the mutual adoration society that this site sounds like. Last time I checked, there are two sides to every market.

Since Prechter and Neely are always right all the time, and you all drink the kool-aid, either all of you have massive profits and can afford to be generous to contrary thought, or more likely you have completely missed one of the greatest upmoves in decades and hate to be reminded of your stupidity. I feel your pain, since I was the other side of your trade

[ss hari]

double edged weapon thoughts have confused investors sitting in emerging markets like india .better to stick to wait and watch policy and move in direction of market.

[OracleLurker]

Sherman - I have a lot of respect for some people right now with good track records that are predicting we see 1200. I do not share that view. I have already gotten the bulk of this from 800 to 990 and dont need the last 50-100 pts. If you got all of it congratulations. There are certain kinds of posts and posters that you almost have to see at important tops (and bottoms) - arguing in favor of a continuation of the trend based on analysis that is, to be charitable, a little less then rigorous. I've never made more percentage wise then i did from mid feb to march of 2000 - of course i knew nothing at the time and you can probably guess how that ended. I would prefer it if Neely and Prechter were back up the truck bullish here - but I think a lot of the bashers overlook that they and really most of the ellioticians I follow called the major 07 top - I'm seeing the same divide now between many non-elliot tech analysts i follow who are setting targets from 1100-1200 and beyond and prechter, neely, yelnick, tony c that have us in the final stages of the rally.

[old age]

Sherman McCoy

Wish you have a more mature attitude as your old age.

But nothing will change you. so be it, then.

[DG]

I feel your pain, since I was the other side of your trade

McCoy, you are such a useless braggart.

Information is an interesting thing. Those without it can pretend they have it. I don't know whose "other side of the trade" you think you were on in March, but it wasn't Neely's. As I posted about two weeks ago in response to someone who said "No one was looking for a bottom in March and a 50% rally":

This is from Neely's March 9th S&P Trading update (I would bet that this has already been posted at Traders Talk, anyway):

"On Friday, the S&P stopped short of our 699.5 buy-stop. But, the good news is that conditions now allow us to try to enter 10 points lower. Go 1/2 Long at 689.5 March ES with a stop at 670.5. If we get in, I expect the S&P to begin its largest and fastest rally in months!".

And this is after he shorted the market down into the March lows. He also didn't catch the entire move up, due to what I thought was a kind of amateurish mistake in not rolling over his position into June futures. Anyway, I'm not saying Neely was the only one saying to switch to the bull side in March, but he was saying exactly that.

Posted by: DG | Sunday, August 09, 2009 at 07:04 PM

So, where's your public record of going long on March 9th? Oh, that's right, you conveniently don't have one, but we're supposed to take you at your word. Fat chance of that.

[Mamma Boom Boom]

IMO, there is at least a 60% chance of seeing an 'island reversal' in the next day or two.

Ned

[yelnick]

Sherman, picking up where DG left off, Prechter was out in late Feb saying the fall was ending and a rally was coming. Based on history, he thought the rally would be 50%. As of Jun11, when Neely called a top, the Prechter world kept on that the rally had more to go, since at that time it hadn't even gone 38%. A recent post I made on this with links to the Feb/Mar pronouncements is here: http://yelnick.typepad.com/yelnick/2009/08/decline-is-nigher-or-market-spikes-higher.html

The bigger point is that the ewave world, small as it may be, called the bubble for what it was in 2005 (again, I have posts on that from that era which you can go back in time on this blog and see), called the top in summer 2007, called the bottom in Mar 2009, and are now calling for this rally to end soon. Prechter got the 1995-2000 bubble wrong, prematurely calling the top many times, and he fumbled the 2002 bottom as well as the 2004-5 period, which you can see from a series of Wolf! Wolf! posts I made back then, such as here http://yelnick.typepad.com/yelnick/2005/11/beyond_the_plan.html, but since 2006 has been spot on with most of what he covers. And Neely until the Jun11 call was even better.

In contrast the punditry from Wall Street and from mainstream economics departments consistently got it wrong, with a few notable exceptions that are now folk heros. The "consensus" is strongly agreed that the recession is over and that stimulus worked, and our biggest problem is inflation not deflation. We shall see which view is right over the next year. Given how off the consensus has been for years, my bet is on the ewave world.

[big foot]

Knock on wood so Prechter's e-world doesn't go back to pre 2006 business as usual.

If Prechter is looking for the next major wave down to start around Sept 15 (I don't know if he is or not for sure as I am not a subscriber)I'd say he is about 2 to 3 months premature.

[Mike McQuaid]

SPX wave 3 forecast off the March reversal may go like this. Counter-cliockwise logarithmic spiral centered March 6 starts March 23. Ring 1 tags the April 17 top, ring 2 tags June 1 top, ring 3 tags Aug 7 top so ring 4 should tag the golden mean retrace of the Oct '07 top to March '09 bottom on about Nov 6 at 1232. This preliminary view has some affinity to the channel based on the 0-2 trendline drawn March 6 to July 8.

[RNB]

Yelnick and others,

Did you see that the CFTC removed hedge exemptions from DB Commodity Services last week. Assuming that this continues across other commodity related funds, then maybe part of the self-reinforcing feedback loop of sell the dollar, buy commodities, buy stocks is or will be impacted (i.e., there is no need to sell the dollar since you cannot buy the commodity through the various commodity ETFs).

Maybe this is part of the reason why the USD is bottoming here?

[Mike McQuaid]

NDX alternate count. Primary wave 2 label Nov 21 '08. Intermediate wave 1 Dec 16 '08. Expanding triangle wave 2 at March 9. Wave 1 fib scale expanded cuts through two congestion areas and ultimately yields 423% opposite Aug '08 resistance. Aug to Nov '08 was the worst of the downturn so the current rally ultimately answering that action puts this chart in the parade of natural rhythm for this index of big tech stocks.

[DG]

Expanding triangle wave 2 at March 9.

Triangles can't be wave 2s, except in Terminal formations.

[Vaughan]

For what it's worth, I have a feeling "the drop" may never come or be very slow. For one thing, there's too much chatter about "the drop." For another, this all feels very familiar to 1998-2000.

I've been studying the markets since 1990 and I don't have a method I can explain other than the feelings I get based on my experiences. Those feelings tell me, among other things, that the people who claim to have crystal balls, people like Robert Prechter, look and act like liars when I see them in person. There's a "spiritualist" named John Edward whose body movements and speech patterns are, to my mind, very similar to Prechter's.

[James]

Mike McQuaid

Can you clarify your statements?

[Mike McQuaid]

James with the logarithmic spiral you'd need that tool on your chart program to get the points. A textbook equal to Robert Fischer's Fibonnacci Trader is what this is about.

[James]

Mike McQuaid

This is what I meant.

Expanding triangle wave 2 at March 9.

Triangles can't be wave 2s, except in Terminal formations.

[DG]

Again, this is just me, since I like to do things with some kind of structure and not just slap down wave labels on moves based on what I want the market to do.

http://www.neowave.com/qow/qow-archive-4.asp

Question:
Can wave-2 ever be a Triangle?

Answer:
Except for the initial "thrust" out of a Contracting Triangle, in general Triangles do not transfer much strength to the post-Triangular pattern. Therefore, if wave-2 is part of a standard, Trending Impulse pattern, it will NEVER occur as a Triangle. But, if part of a Terminal Impulse pattern, there is an outside chance wave-2 might form a Triangle, even though I do not remember ever seeing one. Finally, for reasons mentioned at the start of this paragraph, if wave-2 ever formed a Triangle within a Terminal Impulse, the odds are very high that Terminal would contain a 1st wave extension.

http://www.neowave.com/qow/qow-archive-76.asp
Question:
We all know how to calculate the "thrust" following a Contracting Triangle, but how does one calculate the "thrust" following Expanding and Neutral Triangles.

Answer:
Sanjay Vidyalankar of New Delhi India asked this question back in mid August. I've expanded the question to cover all bases.

Contracting Triangles produce the most dramatic, post-pattern behavior with a "thrust" nearly equal to the widest leg, which in a contraction must be wave-a or b. NEoWave Neutral Triangles (where wave-c is the longest wave) exhibit post-pattern "thrusts" that are about 75% of the width of the largest wave (usually wave-c, but could be b or d). Expanding Triangles have the smallest post-pattern "thrusts," which are usually about 50% of the longest leg (usually wave-e, but could sometimes be wave-d in unusual situations).

[Mike McQuaid]

James , look at the NDX daily chart. I disagree with DG, I see an expanding triangle in there.

[James]

DG

I trusted you. I just did not like Mike repeats "wave 3" whenever market moves up.
I trust when someone says based on expertise, not on convenience.

[chuan]

Dow Jones Industrial Average (DJI: ^DJI)
Index Value: 9,522.81
Trade Time: 2:20pm ET
Change: Up 16.85 (0.18%)
Prev Close: 9,505.96
Open: 9,506.18
Day's Range: 9,500.52 - 9,587.73
---------------------------------------
24 08 09 Mon Dow to fall -90 to 9415
Roubini has not wash his mouth today

[DG]

Mike,

Your counts are by far the most subjective I've ever seen on this site. Like I said once, you should just call what you do McQuaid Wave, because that's really what it is.

What do you have to refute Neely's contention that wave-2 is "never" a Triangle in an Impulse wave? Are you really going to argue that you know more about Elliott Wave than he does?

[DG]

James,

Yes, I see him pushing that count whenever the market is up. I already showed him in detail how it does not meet the rules for an Impulse wave. Obviously, the market is making new highs here, but that doesn't automatically mean we're in an Impulsive environment.

[Mike McQuaid]

Just read the chart fellas.

[Mike McQuaid]

DG, James, I have high regard for Neely, I study his book daily. I call him the dean of Elliott wave teachers. I don't give him guru status, he's probably busy running his business and looking at beaucoup charts. I dare say his book will get updated numerous times, witness Edwards & Magee nine editions. Neely has that archive of Questions and new ideas roll out of his mind. Elliott Wave theory is no way near done yet. I don't give Elliott Wave holy grail status. No guru's, no holy grail. There's much in these charts that doesn't meet the crowd's eye.

[DG]

Mike,

You are right that Elliott Wave and NeoWave aren't "done", but if you'll notice, all of the "new" activity comes in the realm of Corrective formations, not Impulsive formations. The Impulse rules are locked down and have to be, because, at its base, Elliott/NeoWave is a "dualistic" theory, where the market it either in an Impulsive environment or a Corrective environment. Otherwise, the entire theory is just chaos. Neely will never come out and say a Triangle can be a wave-2 in the kind of Impulse you are saying is in the charts. There are 7 Impulse rules on page 5-2 of Mastering Elliott Wave and there are others scattered throughout the book (e.g., no wave-2 can end at more than a 61.8% retrace of a wave-1, although the initial move down of a subdivided wave-2 can retrace 99% of wave-1). The end of your Expanding Triangle retraces about 90% of wave-1 and your wave i of 1 has overlap issues (see November 26th's high and December 11th's low, which are the only real candidates for the top of wave 1 and heart of wave 4). If you really study Neely's book daily, you would see these things as clearly as I see them.

The only way your count can turn out to be right is if everything Neely says about Impulse waves is wrong. This isn't even a matter of Neely being a guru, it's a matter of does wave theory have any hard and fast rules or not. If it doesn't, then there's no point in even bothering to use the terminology because it's all just subjective "fooled by randomness" illusions with no external referents.

[Mike McQuaid]

DG, your mind is divergent to mine. I don't have the energy to reconcile it in blog text. I suggest you make your observations and forecasts and I'll do the same and let's let the charts tell the tale. I think we've gone a long way on that already.

[DG]

Yeah, whatever, Mike. Keep looking for that wave 3, although it'd probably be easier to find if there was ever a wave 1 and 2.

[da bear]

has anyone else taken a look at Figure 5-7 in At The Crest of the Tidal Wave?
it looks like the current pattern in the DJIA.
... and it is an alternative count which means that it is more likely to happen.

also, Prechter writes of this scenario "Figure 5-7 is not a forecast. Indeed, the chances of such a recurrence is nearly nil."

well then, guess it is going to happen then! lol

da bear

[Mike McQuaid]

NDX at the close is on the resistance of the down trendline since the Oct '07 high. Additionally the Bollinger band width is a tight 68.64. The July 23 candle was volatile with its low matching the low of Aug 17 - 19 as support. The point is, it won't take long to confirm or deny ones favotite market view.

[Mike McQuaid]

SPX has had a nice run off the March low, yet it's no time to be complacent. I want to see 7 days trading closing above the 1000 level. This chart is sitting right on the upper Bollinger band. There's an open gap between Aug 20 and 21 as a signal of support too, the point being close proximity signals. A trader needs all the little perks he can get.

[Mike McQuaid]

XLF 60 minute chart Aug 7 had an exhaustion gap at the open. Friday gapped up establishing some support that's going to need to hold in the face of an ugly red candle today. This one may pull back some.

[Masonic Top for 2009?]

August 24, 1987
August 24, 1998
August 24, 2009
August 24, 2020

11 years 22 years and 33 years

11 is a Master Mason Number

[big foot]

You may laugh but Prechter's "least likely scenarios" historically do have a higher than average chance of being right.

Goes hand in hand with his warped sense of market forcasting relevance I suppose.

[KRG]

da bear :

What is Pretcher's least likely scenario?

Cheers

[George from Greece]

Pretcher's least likely scenario

We are still in the 4th wave of Primary 1 (!!)

[da bear]

still in Primary 1????? huh?

well, i emailed EWI about the Figure 5-7 thingie. no response yet.

a Figure 5-7 decline would be like the 1987 crash only two degrees higher.
it would be like the 1930 to 1932 decline...
the thing about figure 5-7 that i like is that Primary wave 3 ends in the nominal low (like 1932) then a rally (1932 to 1937), then a higher Primary Wave 5 low (1938).

da bear

[da bear]

bernanke to be reappointed tomorrow.
that might not be a good omen for stocks... lol

let's try to get the last dollar of joe six pack's money into the market.
Yep. DOW 10,000 should do it!

da bear

[history]

da bear

You are linking history and projection.