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« Technical Note of Caution | Main | The Market is Jittery - What to Watch »

Sunday, May 23, 2010


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Stocks made their high for the year. The April high will not be exceeded before 2011. A couple turning patterns for April and some Fibonacci data strongly suggest this. Other corrections in the rally were only about a month. This correction is multi-month, and may be considered the 4-yr. cycle. That doesn't mean we won't soon make the year's low in a month or two and resume rallying. But we won't make it past the April high during the year.

Larry the Trader

Would not be surprised to see bull take off with a vengeance because Prechter is a superb contrary indicator.

Also would not be surprised to see the mother of all crashes because, hey, it has been 23 years and I think the statute of limitations on getting credit for calling the apocalypse is only 22 and 3/4 years. So the market can finally go to pot because Prechter added no value in calling for it to happen. Predictions that take 23 years are, well, pretty f-ing worthless.

Hank Wernicki

No one can predict the market ............. history proves that <<<<



Based on your tone lately, it appears that you believe the b is finished and that we are firmly in the 1 of C down (May EWT fig 18). Correct? Any chance we are still in the b wave up and that it could run thru summer (I think Dent favours this view for other reasons.) Regardless, lots of damage out there and a good time for investors to sit on their hands.

I watched Roubini on book tv today. Excellent interview, so good in fact I bought his new book.


The investment banks, taking all sides of the trade, coupled with their huge size are fraught with conflicts of interest. They are so huge that they cannot be efectively managed by a CEO.
Solution: break them up by fuction.

CDO's, CDO's squared and CDO's cubed are pure bullshit. They offer no economic, financial or social benefit.

All in, he reinforces your view of the great Obama cave in.


Gleen Loser Neely







Following my previous posts, here is a chart with the Elliott wave count I am using and the pitchforks to help understand what is going on.


ps. Duncan, I had a second question on my last post. It seems that you missed it.
I would appreciate your point of view on hound dog's comment. Thanks again.


Just in case:


Hock, on financial reform, the big guys welcome it. The consumer agency does not affect them. Tragically, in a time of a severe credit crunch, esp. small business, this makes it worse. A really awful reform that fixes nothing and makes it harder for the real economy to get back on its feet.


Hock, on the wave count, we need to break Feb5 (and stay below) to confirm the P3 story down (whether it is a 3rd wave of 5 or a C wave). The Hope Rally appears done but one wave structure permitted is a rolling wave through the summer before a bigger wave down. It could materialize as a slow wave 2 that breaks in a complex way.


Steven_737, I think Hound Dog's comments clever but unsound:

"Deflation in the assets that one WANTS but does not necessarily NEED.
(housing/RE, physical/productive capital, toys, luxuries, inventory,
consumer crap). Inflation in the assets that one NEEDS (food, fuel, energy, water)."

It makes no logical sense in that the type of deflation Edwards is talking about is a general fall in prices and a rise in the value of the Dollar. He is looking at it as a demand-side deflation/inflation. We do not have scarcity of food/fuel/energy/water in the US nor Europe. We are not at Peak Food etc. There is therefore no demand side scramble for NEEDS and a dearth of demand for WANTS. 

Also the data also contradicts him. Luxury goods and high-end cars are selling better than the low-end because the wealthy have the ability to buy. The WANTS are trumping the NEEDS.  As an example, the iPad is flying off the shelves, as are iPhones - certainly not NEEDS but highly WANTED. If you follow Hound Dog's logic you would have missed AAPL. 

When the crisis first hit, we had the Four Foodgroups of the Apocalypse: McDonalds, Hormel (Spam), Hersheys (cheap chocolate) and Campbell's (soup). We saw Walmart do better than Nordstroms. That trend should continue as people search for value. At the same time, the aspirational brands (Coach, DKNY, etc) are also doing very well, as are luxury brands. The middle-of-theroad crap is what is being squeezed.  

So let's (a) not confuse broad financial deflation with local price/demand trends and (b) get the trends right. 


Thanks Y:

I can see why the gamblers are jumping in now. If they are right and don't jump in now, they will miss most of the move percentage wise. Seems like a tough sled though. Got to hand it to them.

I'd have my ass handed to me in 5 minutes.

Sitting in the cash patch,


ES price action is shaping as follows
1) retraced overnight to 1070,
2) crossed above daily pivot 1075
3) at 9:38 took a stub to Friday's close and established its opening range 1079~1085
4) killing time until 10:00EDT Existing Home Sales

Upon breaking out from opening range, price action is likely to target R1 at 1099.

Upon news nervousness price action is likely to test daily pivot at 1075

A deep retracement to 1070 (level from Friday and observed pre-market) is not out of the question; it does not contradict w4 expectation to reach 1099.

Failure of 1070 to hold requires rethinking what price action is telling us.

cheers. :)


At 10:22 market was struggling to breakout of opening range.
Good ES volume so far.

A retracement towards the bottom of opening range 1079 ~1078 may occur to get some traders off the train.

First target north is Friday's high 1088.75

w4 is in general tough to trade

This is an exercise in price action - Elliot wave on the 2 min 5 min chart.

cheers :)


NQ is finding resistance at Friday's high 1834.

NQ opening range is 1815.5 ~1831.

Let's see if NQ will be leading the way.

Since 9:44 EDT NQ has traced out a 5 wave sequence, now in 5th wave looking as an ending diagonal.
Time for wave 2 pullback to 1825 ~1828 ?

Mamma Boom Boom

I see we're filling some of those gaps from late Friday. Very bullish, short term.


ES and NQ have traced out a 5 wave sequence since 8:42 EDT.

Theis 5th wave since approximately 9:45 NQ, 9:55 ES looks like an ending diagonal.

EW count suggests it is time to retrace 38% before the next move.


Support for the retracement
ES at 1076 (61.8%) to 1080.5 (38.2%). 1078.5 at 50% - also opening range bottom (10 min OR)

NQ at 1812 (61.8%) to 1822 (38.2%).
1817 at 50% ; 1816 is opening range (10 min OR) bottom.

Lets see how it plays out.


EW count exercise continued

the 5 wave sequence since 6:45 EDT
can be understood as a 3 wave sequence (w), a retracement (x) followed by a five wave sequence (y), whose wave 1 has played out as a leading diagonal.

Price action at his point would be wave 2 of of (y).

So there ya go; having 2 alternative counts (as always), even for the minor C of w4 towards 1100.



correcting a typo (2 posts above)
ES and NQ have traced out a 5 wave sequence since
6:45 EDT.


NQ is hesitant to breakout of OR;
ES may be setting a bull trap on the 5 min chart;

both at OR top levels


Breakout took place and retraced properly;
Bullish action is expected - continuation move towards targets.


Great advice from Hussman:



Too many overlapping bars ; (ES 5 min chart)
at this point in the wave, they are suggesting either a leading diagonal - expect a good wave 3 thrust after this consolidation
an ending diagonal as wave c of y.


Wave c was expected to last 5 hours. That has almost been fulfilled.

On the 15 min chart there is momentum divergence.

Retracement is in order.

Mamma Boom Boom

3:00 P.M. I am interpreting this action as bullish for the medium term.


In case you missed this in the Hussman note above:

"Savage the Innocents or Restructure the Debt:
Treasury Secretary Eddie Haskell Timothy Geithner has scheduled a trip to Europe this week to urge European leaders "to pay better attention to potential market reactions to policy moves, and to accelerate the European rescue program." This promises to be a fiasco. What could European leaders possibly find more arrogant than to be lectured on bailout policy - not simply by the U.S., but specifically by a one-trick pony bureaucrat whose chief trick is the ability to smoothly talk the language of prudence while simultaneously pillaging the fiscal stability of an entire nation for the benefit of bondholders who made bad loans?"


Mamma Boom Boom

Maybe his real reason for going to Europe, is to make another 'cash contribution' to his Swiss bank account.


As far as retracement goes, w4 has unfinished business.

case 1: w4 may evolve as a w-x-y and so far we have witnessed the w-x and a of y.
b of y may take 1.5 - 3 hours total (so far 1.5 hours)
and c of y may take 2-5 hours.

c of y should be a 5 wave sequence on good momentum.

case 2: w4 may evolve as a complex (w)-(x)-(y) and so far we have witnessed the (w), while now (x) is under way.

(x) may take 3 to 6 hours (or occur overnight)

(y) - under normal circumstances - may require 5 to 11 hours.


Mamma Boom Boom

Last week, my last comment was that Fridays pop looked like a piece of swiss cheese. Today we saw the importance of that.


what is swiss cheese (as far as trading goes) in your dictionary?

you did not answer that on Friday.

Mamma Boom Boom

Sorry, I didn't answer. You were correct that it was full of holes and weak.


"full of holes and weak"



Yelnik can you compile an analysis of the 10 to 30 yr term US bond price forecast using technical chart and economic fundamental perspectives? Short term I see a move down and up to complete an ascending triangle or more likely a flat (see ticker TLT), then an upward break of overhead resistance to eventually reach or exceed highs in March 2009. A shift from fear to the onslaught of inflation will be at the bond price pinnacle.
Another possibility is we have finished the bonds monthly consolidation with the most recent rally being wave C, and the bond market is about to crash taking down stocks with it.
I tend to go with the first.

Mamma Boom Boom

Steven, I'll be staying with my view from last week. I think it's right on schedule.

>Ladies and gentlemen: I believe we are witnessing a successful test of the May 6th low. I now have 4 short term buy signals, which is in addition to other obvious signals.

The most likely path from here, is a rally filling gaps as it goes, but failing to take out the April high. Setting up for a 'real crash', later.

"Rock On"

Posted by: Mamma Boom Boom | Thursday, May 20, 2010 at 08:34 AM<


And oh, thx for reporting on Tesla IPO. Pure electric cars aren't ready until they find a solid way of storing or converting an energy with less weight. Plus the power grid isn't robust enough. Stock price will do well after we're done deflating and gasoline hits the afterburner.

da bear

Mamma Boom Boom,

I think we are due for a rally. if it is not know then it will be soon. Looks to be a WAVE 2 bounce coming up setting up for Prechter's much awaited WAVE 3 of 3 of 3...

So would that be the PRIMARY 3 that Russell is talking about?

We are either in PRIMARY 2 up now or we have one last drop in PRIMARY 1. I am counting the big intra-day 997 crash as the heart of the wave 3 of PRIMARY 1. Then the up move that filled the gap was wave 4. But I looked at the move lower since wave 4 and I am not sure if I see a five waves down from there. I see a i, a ii, a iii, and a iv. If stocks head lower tomorrow then a wave v of PRIMARY 1 is here. Target could be 9,500. 9,500 was one of Robin Landry's numbers from a while back.

The weakness in financials towards the end of the day has me spooked. Also, gold backed off some (it was an a-b-c wave move intraday as well).

da bear


The other side of the coin:

Market was weak;
price action was wimpy and could not overtake Friday's high.

On the hourly chart short term momentum turned negative on the last bar.
For the w4 to continue, the "assumed (x)" wave must stay above the 61.8% retracement at 1065.

crossing below 78% at ~1059 increases the probability that w5 has started.

In "Logical Trader" terms there was an "A up failure" and an "A down" signal at 15:50 (ES)


Mamma Boom Boom

da bear, I won't attempt to put a count on it, but a significant rally is coming soon, IMO. I think we are in a similar environment as August 07. You know how that turned out.

Roger D.

The Dow will mirror the Euro's drop to par with the USD and lower.

Roger D.

Hank Wernicki

5/29/1930 = this coming Monday but it could be sooner

down hard into the end of June


Shanghai break out of downtrend channel:


Carl Futia is looking for 1030-1040 LOW and then off to 1300 SPX!


I am looking for Carl Futia and then off to market!

Mr. Panic

Almost an identical pattern match to the Feb lows and following day, Feb 8?? Of course, it's a fakeout. McOscillator did not confirm the new low on Feb 5 which was a hammer bottom. Last Thur,Fri formed the bearish thrusting candlestick downside continuation pattern (although another TA guy is calling it a bullish piercing pattern) differing from the hammer reversal type bar. Tomorrows action will tell us how it plays out. The markets need very strong positive breadth tomorrow if a bounce is to ensue.(McOscillator raced back to O line and above following the secondary low on Feb 8) Last Thursday saw an all time negative reading (confirmed by Tom McClellan) on the McClellan Oscillator so if nothing else stocks should drop to a new low on less negative McOsc reading but I believe that this leg down still hasn't seen the peak momentum low. McOscillator looks to have been nearly unchanged today with a possible minor change reading. If this is wave iii of 1 down then this spike leg on McOscillator doesn't have any more room to run.
T minus two or three days to reaching a critical threshold. Summation Index was also in the no-mans land zone at Feb bottom also. I wouldn't want to be long with this type of configuration (w/ the market also sub the 200 day average achieved on a massive gap down and in freefall mode).
$BKX gave up most of Friday's gains and the euro looks to have ended its short term rally. $WLSH has tried and failed its backtest of the 200 day average the past 2 days. FXC, the Canadian currency has an almost identical price pattern with the $SPX off its April 23 high.

Mr. Panic

I need to correct a sentence. I meant that the rally in the McClellan Oscillator off the alltime negative readings from last Thursday needs to end now if this is wave iii down so this spike leg of the McOscillator can continue down to new negative readings. My experience is that there is a two day countertrend move on the peak momentum spike that generally fakes out the bulls and the bears before it embarks on to a new momemntum low.

Roger D.

The Hang Seng is hanging by a thread at major support at the open. A break would put it in no man's land per se,a lot further to fall.

Many Dow stocks will break tomorrow, leaving gaps as they enter a 3 of 3. Many count this as a 5th wave of primary 1 down. I think they are wrong as Asian markets break their febuary support. Should be intersting if the GS rising wedge takes hold here this week and next. Maybe Hank W. is right,hard down till the end of June,which fits my count.

Roger D.

Chaung Tzu

Get ready. Neely is about to pull the trigger and go long! C-wave up is about to begin.

Do You Want Fries With That Shake???

That C-Wave didn't come soon enough for our beloved DG. He's tapped-out and now working at Taco Bell.

Roger D.

The Hang Seng daily

Mr. Panic

E-minis down nearly 13 points. I guess I don't need to worry about a gap up tomorrow. Too bad I was too cautious today and didn't add positions and I am sure there will be a nice gap down at the open tomorrow, so I won't get any good entries.


mark, I will take a look at the long bonds. Right now the STU count is pretty clear: and ABC zigzag correction off the recent high in rates, which seems likely to break 3.9%, maybe even getting to 3.7% (where A=C) before a reversal into a big move to higher rates. Yves has expected it to run down below 3%, and I suppose if C=1.6 x A that may be possible. Right now a rush to safety out of Europe is driving rates down. What would drive them back up is likely to be some problems with Treasury auctions, rolling over short term as well as trying to ladder in longer maturities into a reluctant market (reluctant to take long rates at historically low yields). That would coincide with your second scenario.

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