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« A Digression Into Those Nosebleed PE Ratios | Main | Dollar May Have Topped For the Moment »

Saturday, February 20, 2010


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I anticipate another leg down to the 200 day ma around 1025 and then up, up and away to 1300 for the finally rally of this bull market. Another few weeks of correction to shake out the weak hands.


The value of the McClellan Oscillator climbed to +174 on Thursday and the advancing issues were 2 to one for the third day in a row and 5th of the last 7. These reading above +165 show a strong upward momentum that does not dissipate quickly...I think up more although I really like Roger's chart....


here is my take.looks compete expanded flat wave ii(circle).

Roger D.


Thank you, You can't believe how I felt when I logged in and saw my chart listed with your comments. This is a great place to share ideas and you make it all possible.

I am honered,

Roger D.

Roger D.

Yelnick also from "E" on the chart to 1 down is 10 days and from "B" to Friday is 10 days, Hmmmm.



I would agree to the irregular flat, but I believe we are in a wave B down. So instead of a killer wave 3, I believe we are going to see a wave c of A of B down, or wave c of B, with a complex wave C up later this year, or next year (triangle)???. Something here is going to be complex before the house of cards falls apart. There is still a lot of money for the governments to spend to keep this thing floating. I dont understand that stu is so fast on their crash trigger. It is highly likely that this wave 2, or wave (B)/X will keep on going for many month, or even a year longer. 2011 is going to be a bottom accordig to the cycles. Tim woods has a 9-10-9-10-9 year old gold cycle which is going back more than 100 years if I am not misstaken, with a bottom 2001, and a new bottom 2010, local bottoms of course. It is likely that the stock market will do pretty good this year since gold is not supposed to do the same. I would guess that 2011 will be the nasty year if we end up on dow 40, 400, or 2000, or maybe even 5000. My bet is around 2000, and I believe this is an X wave correction, with sharp wave Y left to come down. Super cycle killer. 2012, the end of times, will most likely be a really good stock market year.
Thanks for a great site, with a lot of knowledgeful people writing.

Mike McQuaid

SPX is reapproaching 1120 the 50% retrace line of the Oct '07 high to March '09 low. The waveform of this nearly 12 month rally suggests 1120 resistance is likely to fail, further extending the rally.
Adding the height of the March '09 Head & Shoulders bottom reversal to the neckline arrives at an overlay of a golden mean retrace of the '07 to '09 selloff in the 1229 area. Chart congestion mid '08 matches this area suggesting resistance and a correction at that 1229 area.

Roger D.

Here's the chart with the fractals that Yelnick pointed out. I know little about fractals but this sure has peaked my interest.

Thanks again, Yelnick



Hello Yelnick, thanks for the light weekend reads - nice!

I think TRIANGLES are the flavour of the year so far. Here's another possibly - my weekend analysis of Shanghai Composite MEDIUM-TERM. I am BULLISH on it, and since Shanghai has been seemingly leading world markets so far, it probably has some implications for US Mkts:

Remember, this is medium term


Not to knock the analysis of anyone in particular but what I have noticed (and not just here) is a tendency, to seek theoretical/technical justification for higher and in some cases much higher prices. And I'm only referring to bear oriented sites. Can anyone recall if a similar overweight bias for lower prices could be found on bullish sites a year ago? I know this may sound silly but frankly, when one steps back to gain a little empirical perspective, what doesn't these days?

Fundamentally the whole thing smells like a carp after three days in the sun. I don't care if it jumps all next week or into the summer. Unless it starts from much lower levels I'm having none of it.

Hank Wernicki

Here's another fractal that supports a bearish turn down. Notice the larger fractal ( parent ) that is a copy of the child fractal back in 2009. ( Not Scaled )

If the market does not reverse this week something else developing that may be more bullish.


For any Europeans out there ...


The other model to consider comes from Neely and is not orthodox ewave.

Hey Yelnick,

Neely's current count is different from the one I put down in the comments, since he doesn't see new highs coming. My idea was more of a bullish alternative to what Neely was looking for, in case what he says doesn't work out, but, yes, it was based on some ideas Neely has about formations which aren't part of the body of ideas Elliott originally set out. Without having a good chart of the time period before Neely "discovered" these rules, it's impossible for me to say if these formations existed in Elliott's day or if they are new behaviors emerging from an evolving market.

And if anyone wants a bullish number to "watch" for, how about 1421.56? There are times when what was originally believed to be a Triangle turns into a Diametric and there are specific rules for the relationships between the various segments within Diametrics which would allow the final wave up to reach that level without violating the rules.



Tony Caldaro ( starting to slide out of the long term bear camp. He has changed his long term Dow count to show a super cycle bear market ending in March 2009 and a new supercycle bull market beginning then. However, he has not yet changed his S&P count.

For myself, I have always considered 1974-2000 (or, if you prefer, 1982-2000) to be just the first wave of a larger five wave structure. Then the second wave of this structure I take to have ended in March 2009.


I forgot to mention a small piece of supporting evidence. I started trading in 1970. I remember well the 1974 and 1982 low points. It is my opinion that the extent and strength of bearish sentiment in 2008-09 far exceeded that of 1974 or 1982. This is typical of a "wave 2" low point.


... is starting to slide out of the long term bear camp

Why is it that EW is given so much credibility here as a forecasting tool when all the evidence suggests that it is a post event labeling mechanism at best?

Mamma Boom Boom

>Tony Caldaro ( starting to slide out of the long term bear camp.<

Are we all enjoying the 'Assimilation Room'? I told you, it doesn't hurt a bit, does it. (Ah..ha..ha..ha..ha)


Hello Duncan;

Regarding the Neely guideline (triangle ending a triple three), is this what you are contemplating?


a Global view:


Steven 737, that is closer to DG's view. I start my ending triangle on Nov2, after an X wave down. The run into Jan19 was the first wave, leg T1 (counted as a terminal triangle to avoid confusion in all the As and Bs), and it broke into 3 waves. The drop since Jan is the T2 leg, and it has a ways to go to complete. Unless this becomes a running triangle, it should end above the Nov2 level of Sp1029. That indeed is the tell as to whether this is a larger wave down or a terminal triangle forming. If it goes farther, we might have a running triangle (bigger B or T2 than A of T1) but more likely we are in a downsweep in line with the Prechterian view.

Wave Rust

Caldaro is getting to the correct count.

Carl Futia is dead on. I'll bet Carl looks at useless things like Advance decline, momentum, etc. Carl's got 5 years more trading than me.

Look here, I've been hinting/pointing (although less frequently) for months in this largely bearish blog comment section.

IT IS A BULL MARKET! (thats not a hint. it's a declarative statement!)

The only real issues I have with Caldaro's count on the daily and weekly Dow is unwinding the overlaps prior to the black 3. But that is inconsequential.

For daily trading purposes, the current drop from spx 1150 looks like a 2 of some lesser degree. yea yea ,,, I hear the bwaahhaaaa's :) But it could just get another .618 of the A leg down; measured to 1039, or even got get the 1025 gap,,, maybe the gap at 911 !!! None of those would change the bull to a bear.

The question is does it go up and touch 1115 or 1128 first and then reverse down. I suspect those questions to be answered by Tuesday's close.

Oh yeah, Caldaro's black 3 is suspect because aren't 3's supposed to be the recogntion wave, even if it is a (3) of primary 1 of I of ,,,, ??

Somebody got hacked off when I wrote this before,,, about 100 points or so lower than the high,,, (as I remember it). So, I'll be real clear.

NEVER, EVER FADE THE U.S. Federal Reserve ! Never !

Tomorrow looks to be a possible outside day and a reversal day. I'm sure we will see Dow 10,100; spx 1076 and 1058 real soon too.

For the 'gates of hell' bears - the gates are rusted shut. I know about rust! :)

For the daily waves of the 2 wave from SPX 1150 - very simple-
For minor A of Intermediate 2
C ended than c of C-1056 on Feb. 8th

For minor B
the chop till you drop of a couple 1's and 2's (a's & b's) and as of Friday looks like the d of c then Monday gets the rest of d the wimpout e.

Then the minor C to 1039 or more.

Analyzing the markets is simple. Trading your analysis is complicated. Go read Carl Futia's salient view.

Look at the advance decline line since the 30's - notice anything odd. Look at the orthodox top (imho) in 1998 and the '98 low, then the 2000 top, then the 2002 bottom, then the 2007 top then the 2009 low. What do you see? Put up a weekly chart of the Dow or SPX back to January 1998.


Trade well and take profits often.

wave rust


Thank you Duncan;

I had the first two structures ready to post

and then I saw your clarification, leading to:


I think that I fully comprehend your "Triangle ending the triple three" scenario.

Roger D.

I wrote this comment several months ago on another blog and I thought I would post a partial part about what I see as the greatest obstacle for long term growth in the future.

This concerns the M1 Multiplier and the latest number reported is .809 a new hisoric low. Now the highest it ever went in the last 30 years is when Paul Volcker raised interest rates to 20 pct to stop inflationary runaway in 1980-1981.

To explain the whole thing simply:

When the multiplier is at 4.00
For every 1 dollar pumped in, 4 dollars are created through deposits.

The Multiplier of "4.00" is an inversion of this example of 1/4.

Now the chart is showing for every 1 dollar pumped in we're actually losing 19 cents. .809 - 1.00 = -.19

Now in a normal economic system where transactions and loans are taking place everyday between people and banks a healthy level would be between 4.50 and 3.00. As you can see the indicator stood in 1987 at about 3.00, the same year as Mr Greenspan was appointed as Federal Reserve chairman.

You remember in 1987 the stock market crashed and the Federal Reserve lowered rates to spur economic growth. During Mr. Greenspan's tenure there where several financial panics. The year 1990 and 2000 come to mind.

The bubbles are legendary, the dot com in 1999-2000 and the housing bubble between 2000 to 2005. As result of these easy money policies,with the Fed not using the tools they have at their disposal. A cycle of boom and bust have plagued America for almost a quarter of a century.

But let's get back to the issue at hand, Mr Bernanke.

Notice the graphline has descended gradually and when the sub prime market imploded and the financial system almost collapsed from the housing bubble, the graphline collapsed.

I'll let Mr. Bernanke explain in his own words what this signifies.

"The "money multiplier," M1/BASE. In fractional-reserve banking systems, the total money supply (including bank deposits) is larger than the monetary base. As is familiar from textbook treatments, the so-called money multiplier, M1/BASE, is a decreasing function of the currency-deposit ratio chosen by the public and the reserve-deposit ratio chosen by commercial banks. At the beginning of the 1930s, M1/BASE was relatively low (not much above one) in countries in which banking was less developed, or in which people retained a preference for currency in transactions. In contrast, in the financially well-developed United States this ratio was close to four in 1929"


Bernanke on the Great Depression

Yes, that is correct in the Great depression this ratio stood at 4.00

What does the Fed report this ratio now? The graph reads a level of .811

A historic low. Remember Mr Bernanke says a ratio below 1.00 typifies....

"M1/BASE was relatively low (not much above one) in countries in which banking was less developed, or in which people retained a preference for currency in transactions."

In Fed speak that translates to people are unable to obtain loans or people are tapped out or paying off debt. Probably a combination of this and banks hoarding
cash to reliquify their balance sheets.

Now currently until the Bank balance sheets are "really solid" and not filled with toxic crap. BTW the big money center banks are still tehnically insolvent.
We will never see this multiplier go back up substantially. Not till these banks are dealt with in a constructive way. The insolvent ones need to be closed, assets sold off and recapitalised if possible.

The major problem is it's not going to happen. The stakeholders will never agree to it. FDR closed the bad banks in the 1930's and that's why the multiplier never fell.

untill the banking system is healthy there will be no long term bull market,imho.

Here's the current chart.


Roger D.

Ben Bernanke on the Great Depression



Has your view of the market for 2010 changed significantly. Seems that there is a lot of noise out there. Volume seems to be declining significantly on this rise up.

Thanks in advance for your comment


Hey DG/Bird

Over here in OZ I am now counting the low on Feb 15 (contracting triangle) as bottom of the Jan-Feb decline. I count from jan 19 or 20 so the decline was 17/18 days. Today is the 5th day of our rally so we have a bit more to go. Our internals and my alterntive measures of risk appetite are weak so I am favouring the Neely outcome over DG, at least here in OZ anyway, but there is enough volume and momentum to suggest DG's contracting triangle has a chance. The Aussie dollar though favours DG though.

Hank Wernicki

Went Long the NQ tonight, IF this continues then another Yelnick Monday Pump

Maybe more on the Open


Hank Wernicki

G2 you hit it on the nail !

Fractals are More Exact unlike Waves ( not to offend anyone on this board )

But I do use EW as a tool just like anything else out there

I'll post the NQ chart later

Roger D.

I may never see a chart like this again. Maybe, maybe not. This monthly chart in AAPL looks like a classic parabolica in a commodity, sugar,coffee?

I ask where do you think it's going to go from here? 300? maybe 220,but just the same it will collapse I gurantee it.

On the daily it has probably one more thrust up. How high,well it it gets close to the old high how many fractals can you see?

Just food for thought.


AAPL Monthly

AAPL Daily


I was looking at sectors. IYK,IYC are testing the Jan 11th highs. They appear to be in 5th waves as the decline from the Jan 11th highs are a clear 3 waves down.

I'm going to setup a blog site devoted to what I think the long wave count is, I've yet to see anyone else propose this count. It will be called The Long and Grinding Road. I think this is an X wave since 03/09 of an ABCxABC which started in 03/00. I'll go into the basis for this count that implies a long grinding sideways market.


"NEVER, EVER FADE THE U.S. Federal Reserve ! Never !"

You can pound the table on that notion as much as you want but until you explain why we had not one, but two, bear markets with 50%+ declines from major tops in the S&P in the past decade EVEN THOUGH the Fed would rather have not had that happen, this is just not credible.

Was the Fed OK with two 50% declines? Because if they weren't, yet they still happened, that means that the market is more powerful than the Fed, no?

Roger D.

So, I'll be real clear.

NEVER, EVER FADE THE U.S. Federal Reserve ! Never !

I'll take that bet.

And don't be surprised if we see this skullduggery again real soon.



Chuck, my long term view hasn't changed: roller coaster market in 2010 but not to new lows, deeper drop in 2011. New bull to start after, maybe as early as 2011 or as late as 2017 with 2014 as most likely low for decades.


i have posted an updated count for the Euro/USD pair if anyone is interested.


Hello Yelnick and friends,

Expecting a drop. Short-term BEARISH now on the market, thanks to O/B indicators and the 'Shanghai Connection'. All of it here in this post:


Wave Rust and Carl Futia - For as long as you've been trading, it's a bit surprising your lack of humility. Furthermore, to state that it's a bull market is perspective not fact! For example, one could factually state the market has been range bound for 12 years (or longer) and it currently is in the middle of that range. Is that a bull market? It would be easy to assume that by stating it is a bull market your meaning is that the market will continue to go higher. Still it is so vague it becomes more distraction than an aid. For a long time, people (like the CNBC cheerleaders) have been pounding the table with that same bull market mantra and where has that gotten us? Do you really want to be Cramer and Kudlow?


A look at the DJIA historical price action from lows to highs, observations, and questions...

1) 1896 - 1929 (33 years):

28 - 386 (358 points / 1279 % gain)

2) 1929 - 1932 (> 3 years):

386 - 41 (345 points / 96 % retrace)

3) 1932 - 1973 (40 years):

41 - 1067 (1026 points / 2502 % gain)

4) 1973 - 1974 (> 2 years):

1067 - 570 (497 points / 47 % retrace)

5) 1974 - 2007 (33 years):

570 - 14198 (13628 points / 2391 % gain)


- 1896 - 2007 (111 years)
- time: leg 2 retraced > 9 % of leg 1
- time: leg 4 retraced > 5 % of leg 3

If the move from 28 to 14198 on the DJIA from 1896 to 2007 is a complete wave/pattern, could we expect at least a 5 - 9 % retracement in terms of time? If so, then:

- 5 % of 111 years = 5.5 years (2013)
- 9 % of 111 years = 10 years (2017)

Once leg 1 made its high in 1929, it took 25 years to make new highs. In addition, once leg 3 made its high in 1973, it took about 10 years to make new highs. Is it probable that new highs will not be seen until at least 2017?


Your thoughts are appreciated.

The following piece I posted about two years ago, but I thought I would share it again since it is relevant to the above issues.


Hank Wernicki

Here's the chart from last night's NQ trade .. Up 12 points this morning !

Rather "obvious iteration" and "exact" unlike a wave count

vipul garg

donot dismiss the possibilities of ' someone ' having an 'exact' wave count.
all anaylsis have their moments.



all anaylsis have their moments

Isn't that just another way of saying that counts cannot be consistently predicted in advance?

Neely is quite open about this in saying that counts are only clear at major turning points. So, as the current count is unclear we must be some way away from the next COT.

Account Deleted

Hi Vipul !!

What structure r u looking at in INDIAN Sensex.Can u please share your valualble perspective.

Thanx in advance


Canadian Money

SP500 Short-Term Wave Count

The high just above 1112 on Friday Feb. 19th may have been the start of a downward move with a wave 1 and wave 2 complete. The possible wave 2 retraced virtually all of wave 1 but not quite. Shows up well on a 2 day chart.

This is an opportunity for the market to end the rally from the Feb. 5th low. Will be interesting to watch.

Dave B.

Shorts are about to get PUNISHED once again...


All, we just had a triple top. Anyone care to count this? Zoran loved these formations and applied Neely's ending terminal triangle count. The relatively fast wave T4 over the weekend I see as a timing distortion due to not including the pre and after market trading in the timescale.


A very sad day for science indeed:

Just think of all the dickhead pseudo scientists that jumped on this band wagon.




Bill McLaren also speaks to a down 2011. The thought of 4 to 6 months of thrashing around in 2010 is also starting to make some sense:



Hock, thanks for sharing the ClimateGate article pout of Canada. Like Tiger's recent press conference that didn't work out for him, Phil Jones tried a "limited hangout" - admit some mistakes, pull attention away from others. Isn't working for Phil or he ClimateGate Cabal. They had suppressed dissenting science, and now the floodgates have opened.


an updated count for the spx is posted if anyone is interested

Roger D.

If you wonder what's going on in the Dow? Some stocks are just not finished making top yet,but very soon indeed.


"In Fed speak that translates to people are unable to obtain loans or people are tapped out or paying off debt. Probably a combination of this and banks hoarding cash to reliquify their balance sheets."

By which you mean they have already borrowed too much, and they realise that they will struggle to repay the debts they have already. And the banks have realised that they have over-lent and giving any more money to most borrowers will just mean bigger write-offs in the future.

If that is what you mean, I agree.

How can we expect banks to lend more, when their main concern is getting back what they have already lent?

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