Market is in a Thrust Out of a Running Triangle

Interesting pattern has developed. We got to 1127, right in the range of the triple top, then began fading. The wave pattern is well captured in this zoomed-in part of a Daneric chart, that we recently completed a running triangle (B leg larger than A) and have been in the thrust out of the pattern. Normally the fifth wave thrust after a triangle goes the distance of the widest part of the triangle, which in this case is the B leg from 1091 to 1111 or 20 pts. From the end of the triangle at 1105, this pointed to 1125, close to the 1127 momentary intraday high so far today. 

 

The thrust up must be faster than the triangle. Neely says twice as fast, meaning it completes in half the time, which means it should end today or tomorrow. So it could be done ... but we now hit a really nuanced area between orthodox wave theory and NEoWave. The STU has called this a thrust out of a running triangle. Neely notes that a running triangle indicates powerful forces (in this case bullish), and can propel the thrust to spike much higher than that - going usually 1.6x the triangle width (32 pts, targeting 1138), and at times 2.6x (44 pts, targeting 1150) - happy predictions for the head & shoulders crowd, and emboldening to the bulls. 

But Neely has more precise requirements for such a running triangle, including that the trendlines should slope (in this case upwards). You can see such a pattern from 1987-1994, an upwards sloping running triangle that was followed by a very strong thrust, the extended fifth wave of the dot-com mania. In this case the running triangle is a barrier triangle - it hit a flat barrier rather than sloping upwards. This makes it merely an "irregular" triangle to Neely, which implies a thrust that is only "slightly" greater than from a normal triangle. Getting to 1127 fits that, as would a final attempt to hit 1130 later today or tomorrow. The market is about to overlap, however, which suggests a top is in, or we are seeing an ending diagonal (terminal pattern to Neely) form of the fifth wave thrust. 

Comments

[pow]

i appreciate your blog so much, but

come on, pleeese... don't cite daneric, he is completely blind to the market, just keeps repeating what he reads on the ewi reports, and act as if he was the one who told it first.
what he says has absolutely no value, because completely unoriginal and told ten times before by others.. he just plays catch up with the latest ewi reports on the short, medium, and long term counts, and try to hide and differenciate on the very short timeframes, where he usually gives very odd, forced, innatural counts just to keep in touch with the largeer ewi picture which he has the mission to stick to at all costs..

aside from that your blog is great, probably the best of his genre

[Bull trade]

The super bullish case here is look at the July 2010 low and notice how the SPX has formed a "right translating" leading diagonal.

Right translation is 7 weeks up into early August, then 3 weeks down into the early September (Hurst 10 week low)

Only thing really holding this market back it the next Hurst 5 week low which is due late September then we should be OFF TO THE RACES in an optimistic short covering frenzy buy panic I'm guessing may be similar to late 1998.

[yelnick]

POW, thanks for your comments. SImple thing to understand: STU charts are copyrighted and I only publish after getting written permission. The process is pretty expeditious but not realtime. I use charts form other sites mostly to show counts - often EWI counts. Thus Daneric is quite useful when he is in sync with the STu (which is not always despite the idle chatter about him). You don't need to read more into their use unless I discuss their analysis in the blog.

[Mamma Boom Boom]

I don't expect much of a pause, here. I think we're about to light the wick.

[JT]

"i appreciate your blog so much, but come on, pleeese... don't cite daneric, he is completely blind to the market, just keeps repeating what he reads on the ewi reports, and act as if he was the one who told it first. what he says has absolutely no value..." - pow

I could not have said it any better.
You are 100% correct. Daneric appears to be nothing more than a portal for EWI. His counts are ALWAYS bearish, and they simply mimic whatever EWI has.

The guy has been flat-out WRONG for over 12 months now . . . but he's even worse than a "broken clock" because he obviously doesn't trade.

He has no respect for the market.
He has no respect for PRICES in the market. He is totally BIASED to the market and blind to what it is trying to convey.

More often than not, he throws up a TON of charts and indicators onto his blog - - - hoping that something will actually "stick". Unfortunately for this young man ( who only has a few years of market experience under his belt ), he falls into the trap of placing significant predictive value on "indicators" that have very little value whatsoever, let alone predictive value.

Last week, he spent a tremendous amount of time analyzing the NYSE A/D line and highlighting various divergences . . . He even goes to the point of placing an Elliiott Wave count on the NYSE A/D line, as he frequently does on the VIX of all things! Unfortunately for Daneric, he is completely clueless to the fact that the NYSE A/D line is literally worthless as an indicator given how many NON-OPERATING companies are now listed on the NYSE . . . preferreds, closed-end funds, etc. He'd be much better off using the A/D line from the SPX. But I guess he hasn't figure that out yet.

Furthermore, Daneric does not appear to have any interest in making money from trading the market. If he did, he'd stop ranting about the typical "conspiracy" theories like most PERMA-BEAR blogs do, and he'd actually play the long side of the market every now and then.

But no, his entire goal is to "Pick the Top" of the equity market and claim notoriety from it, drinking from Prechter's P3 "Kool-Aid" all the way down even though he'd be Bankrupt if he actually traded his bearish wave counts over the last 12 months!

Does anyone recall when the last time was that this kid made money trading the market in the last 12 months?

I certainly can't.

[da bear]

The 1930 DJIA made a secondary top in mid-April, ran down into Independence Day, then ran up into Labor Day and until the week after(September 10th. Then the market fell into the summer of 1932.

So far, the market in 2010 has been a repeat of 1930 (and the wave count is the same too, with the 2 of C being over, and wave 3 of C imminent). So, stocks should turn down soon.

da bear

[DG]

Not saying we'll see a repeat (we're not in that place in the wave count, for one) but Neely also saw a similar formation taking place (one Degree higher) in January/February of 2007 and that didn't work out at all.

When I looked at the intraday NeoWave charts I keep, the structure of the initial decline from 1100, which Neely cited as the beginning of his Running Correction, wasn't nearly "violent" enough to qualify as wave-A of anything.

I would bet that we're in some kind of Diametric (wave-A up was the initial thrust in early September) and it's actually closer to ending. I just don't see this as the lead-up to a huge rally of the sort Neely's seeing.

[Michael]

"So far, the market in 2010 has been a repeat of 1930 (and the wave count is the same too, with the 2 of C being over, and wave 3 of C imminent). So, stocks should turn down soon." da bear

Can you tell us what the correlation factor is between the 2010 market and that of 1930?

That would be most helpful.
Thanks.
:)

[Michael]

PS.

The reason I ask about the correlation is because technician Louise Yamada (formerly the top ranked technician at Smith Barney from 2001-2004) suggested that there was a very high correlation between the 2000 Bear to the 1929-1942 Bear market, including the parallel 1932-38 (2002-08) advance and the 1937-38 style 49% decline (2007-08).

According to her analysis, we would be somewhere
in the 1938-42 analogy of the Rocky Road. Your guess is as good as mine as to where we specifically are now.

http://www.ritholtz.com/blog/2009/05/the-1938-parallel/

See chart above.

[Daniel - Taz]

I actually think the Composite A-D line is one of, if not the best indicator out there. I used to think it was useless versus the Common-Only but my thinking has been turned upside down by Fib (Dave) at technical watch. Unfortunately most people are unaware that it is more of a long-term trading tool.

Cheers DG I was wondering what you were thinking. We had a three wave move into our recent bottom which as far as I can see could not have completed anything over here in OZ. That said, our internal backdrop is very constructive for a rally. Offsetting that however is we are seeing tremendous speculation in the small caps versus our top 20.

So I think we go lower before we can move sharply higher. If a diametric ended here in OZ in August, then maybe we are in wave b of a flat with wave-c to come to complete an X?????

[Daniel - Taz]

If i run a 0-B line across the alleged start of A and end of B here in OZ (assuming Neely is correct about the US), the top 20 failed to take it out in less time so i guess we have to fall back to within the range first.

[Account Deleted]

S&P 500 analysis after closing bell

[DG]

Hi Taz,

The chart for the AORD looks a lot stronger with that higher low at the end of that 3-wave decline, compared to the S&P which went a lot lower. The Fib relationships during that decline on the S&P were consistent with a Double Combination ending with a Triangle, which completed on August 31st. That thrust out of that Triangle (which I remember seeing start on the 31st) would be the wave-A of the Diametric I mentioned. Diametrics can drift upward much like Ascending Triangles.

Given that context, I'm more come around to Neely's old count, with the Contracting Triangle ending wave-e at the late August low, lately, especially when I consider the shortness, time-wise, of the decline from the August high. I didn't see that as a wave-c of a C-Failure Flat.

This Diametric would be the wave-A of whatever pattern will follow that Contracting Triangle.

[Daniel - Taz]

Thanks DG

You looking for contraction or expansion first with your diametric?

Your Russell 2000 looks like a non starter looking at the June to July rally (orthodox high)

[DG]

Hi Taz,

I am looking at a Diametric coming to completion now on the Hourly charts, for wave-A or wave-a of A (probably the latter) of the pattern following the end of the Contracting Triangle. The Contracting Triangle ended on August 31st (ran from April's high to end of August) and we're in the beginning stage of the rally to follow, with the first wave of it nearing an end. It was contracting first (the big rally up from the August lows was wave-a of the Diametric) and should be ending soon.

If that's true, this rally's just about over and we retrace. How much we retrace will provide some clues about what's going on. If Neely's right and we are in the wave-C of a Flat which began at the February low, this should be a 5-waver. But, if I'm right in the shorter-term and this initial wave is a :3, the 5-waver could turn into a Terminal. This is the right time and place for one. And, a lagging Russell 2000 would be consistent with that kind of mass psychology.

So, even if we break out of the current trading range, which we definitely could, we still have the larger trading range and resistance above to deal with. If Neely's count is right, a Terminal to a lower high below April's would make perfect sense on both the S&P and the Russell. Timing-wise, it should take a few months to get there, but if it's a Terminal, we'll revisit the August lows within weeks after it finishes.

[Daniel - Taz]

Cheers DG

That cleared it up for me.

The short end of the curve got cleaned up last night so am hoping for equities to do the same.

Even though i was bulled up I missed the bottom and am looking for a retrace to jump on board provided the internals hold up and sentiment gets bad.

I think we need a decent pullback in the US to get the SOX in front again.

[Wave Rust]

Taz, the correction is over. the rally is going to get ugly at spx 1150 and then at 1170's. but it's going to just keep going.

lots of people wait for the pullback that never comes. they jump in at the wrong time. imo, if you miss the bottom, just enter on a small 1 or 2 day pullback, then judiciously and artfully use stops. and every time you get stopped out, just look for the next buy at the end of some intraday or daily c-wave.

remember, keeping the markets looking ugly is how big money is made. ugly keeps the average trader out or on the wrong side until exactly the wrong time, which gives smart money its well deserved name.

most EW blogs do a great job of promoting the bearish view. bless their little hearts. i'm so glad they keep on keeping people bearish.

that makes low volume price spikes the current means of getting out of the low hole. very ugly, hard to label ,,,, so it must be bearish, right? but price keeps 'uglying' ever higher.

look at that correction in AORD from may '06 ,,,, a spike and 3 rising bottoms. look familiar, but at a lower degree? :)

just my opinion, but 5,300 looks like a minimum target

wave rust

[Daniel - Taz]

Hi Wave,

I am happy to accept the correction is over but I have a problem with how the Russell 2000 is rallying in the US and how our large caps are rallying here. I think they are too slow - i think we need a pullback to get everything in sync again for the move higher.

On our large caps, volume has dropped off by 33% in relation to the drop into the bottom. With respect to our small caps we have had 4th 6th and 8th biggest volume days in the past 5 trading days. I think the sentiment has become too bullish to fast and we need a drop of 5% or theerabouts to even things out.

In terms of fractals I think the current rally looks very much like the rally into the April top.

[Account Deleted]

S&P 500 futures before opening bell

[Hank Wernicki]

Flash Crash # 2 begins shortly

[vipul garg]

is the nasdaq and technology space looking bullish?

[Mamma Boom Boom]

>Flash Crash # 2 begins shortly

Posted by: Hank Wernicki | Wednesday, September 15, 2010 at 08:30 AM<

Whoooow Dude!

[cloudslicer]

I was listening to a local commentary, Ed Handley, and he basically said that the tax laws are having an influence on the market in that there is a tendancy to to sell gainers this year but wait on selling losers until next year to use them to write down capital gains in 2011.

My elliot wave coun, for what its worth is this:

I consider this move down off the April highs as a primary wave Y wave of an ABCxABC from March 2000. I think we are in a minor wave B up of intermediate wave A down since the lows of July and are finishing up the C wave of this minor B wave up.

We should then get the minor C down to finish off the intermediate wave A of Primary wave Y down. This should easilly take us down into the lower 900's on the S&P.

As an alternate bullush count, after the minor C wave you would have 3 waves down off the Apil highs, and thus would have a remote change that you actually had 5 wave move off the 03/09 lows and not a double zig zag and three down from 04/10. I don't think we are in a new secular bull but that would be the time were a new secular bullish force should exert itself.

In either case, bullish or bearish, it should be a good opportunity to go long once minor C down completes.

[Mamma Boom Boom]

Correction Over

[Chabazite]

How shortly is shortly, Hank? You did promise that it would all be over by mid September, so that doesn't leave much room now. I have such high expectations. :) Chab.

[Chabazite]

Correction Over
---------------
Yes, it is very difficult to watch these markets and not come to the conclusion that someone somewhere (lets call him the 'fat controller') is spotting the obvious moves and then turning the market in the opposite direction. He wins; I lose. Time after time after ...

[Dsquare]

Instant Karma (Paying for Bush's sins/British pollute the US with OIL): Mississippi River Brimming with Dead Fish Near Gulf of Mexico

http://www.treehugger.com/files/2010/09/river-dead-fish-clogs-mississippi-gulf.php

[Chabazite]

Instant Karma (Paying for Bush's sins/British pollute the US with OIL)
---------------------------------------------------------------------
British? - Oh, are you talking about BP, that 39% US owned oil producer?

[Mamma Boom Boom]

Anyone know how to get around drm rights to burn videos?

[Wave Rust]

Flash Crash #2 ?? soon??

maybe flash crash Up!

wave rust

[Wave Rust]

Taz, i see your enthusiasm point. the daily RUT chart has completed a very long correction from October '09.

The divergence for RUT at the August low has the same type of momentum signature that the March '09 low had. That is what I expect ,,,, a few months of no correction.

i side with caldaro's view that RUT has never had bull market, and continues in an a-b-c structure ,,,, and as they say, abc's can do whatever they want.

very very bullish, imho.

wave rust

[chang wick]

MBB-it's a fuse

[Cal]

Yes probably circuit breaker trigger fri or mon. Then short sigh of relief then an "event" that shuts things down for week or weeks and the world will look quite different and lots of serious angry faces

[Ant]

Cloudslicer

My cycles work suggests that your theory has merit about a further down leg from here - i have a very strong up market showing in the first few months of 2011. So for that to occur, i would logically expect it to commencefrom lower than current levels.

[Mamma Boom Boom]

>MBB-it's a fuse

Posted by: chang wick<

What do you mean?

[viagra online]

This is truly a Revolting Development as William Bendix use to say on TV in a different generation or two ago. Maybe three. I'm thinking seriously now about Mac and also about selling my stock.