PSYCH! FOOLED YA!

Seriously though, there is an update, just not where you'd expect.

http://www.deepwaveanalytics.com/baslounge/?p=13

MANAGING EXPECTATIONS AND FOURTH WAVES

To call the past couple weeks a whipsawing mess would be understating the obvious.  As you cast your eyes over to the right at the long term chart, the expectations are for a fourth wave here and up to this point it has not disappointed.  Fourth waves are typically complicated messes with fits and starts in both directions which challenges even the best of trading systems.  This is where weaknesses begin to show in the seemingly never ending run of the third wave.  Bulls pin their hopes on another leg to the upside and bears pin their hopes that the top is in.  Ultimately they both turn out to be right and wrong at the same time as the fifth wave ensues higher.  At that point bulls become jubilant and the bears disillusioned only to have the tables turn soon there after as the fifth wave ends and a more substantial decline begins.  The expectations of fourth waves from a minimum perspective should be similar to the same degree second wave in time and/or price.  At present it is easy to see that we are very early on both. 

Next visiting the ES chart, something interesting has happened.  At both the all time high pivot (3) and the next major pivot low 'A', they were not visited by the cash markets.  Typically when this happens it is not long after before the cash markets play 'catch up' and finds these price points. 

 

 

Taking both these into consideration, it would seem the most logical of Elliott Wave structures to cover both the time perspective and hit both of the price points that the cash markets have been left out of would be either a flat or an expanded flat.

 

 

So if you've felt a little frustrated over the past couple of weeks, don't be too hard on yourself, that is what fourth waves do, frustrate.   Keep your head up and your risk down.



FIVE OF SIX INDICATOR TRIPS SEVENTH SELL SIGNAL

A new toy I've been playing with is the MMTW (% stocks over the 20 day moving average).  I've noticed when this thing exceeds 70% it has a tendency to predict relatively accurately an eminent decline on a cross back below the 70% mark.  Today was that day.  Last post we were tracking a diagonal which was initially thought to be the fifth wave of the sequence, but only turned out to be wave v of the third wave.  Wasn't the first time I've been off by one and I'd be willing to put up a pretty sizey chunk of change on a wager that it won't be my last either.  Below is a combination of the S&P 500 and the MMTW.

On the long term S&P chart to the right the MACD is currently close to issuing a sell signal and the histogram has been slowly bleeding off momentum as the price action has muddled along sideways over the past week or so.  Short term looked like three waves into the highs which would indicate a flat or something of the like.  I'm currently looking for a five wave down sequence to complete the decline, but it would appear to just be kicking off the third wave and with the other indicators indicating the bears may have the ball I like the short side here.  Initially (last night) I wasn't very confident in this count, but it seems to be playing out well now so this is what I'm sticking with unless a curve ball gets thrown into the mix. Getcha' some!

BEARS DO SOME TECHNICAL DAMAGE

The past week has been nothing but tracking a structure, a diagonal to be precise.  This structure shows up at the ends of moves as momentum wanes and finally gives way to a spectacular change in trend.  Friday was that day.

The above general structure appeared in multiple markets and from the standpoint of one wanting to short, all that was required was patience.  Not all the markets busted channel support, but it is evident that the small caps are going to lead this decline.  Exhibit A  The Russell 2000.  The decline at a minimum has another 20pts to go before it catches any sort of trendline support.  Although it reclaimed the lower trendline and closed within, but the damage is already done.

The Nasdaq Composite also pierced support opening the door to continued downside.  I'm expecting all the posted charts to find the 23.6% retrace at a minimum, but more than likely will at least find the 50% mark at which point we'll need to evaluate the shape of the decline to see if it is impulsive looking or not. 

The Dow Jones Industrial Average is currently playing ping pong between multiple trend lines but I fully anticipate downside resolution and a similar 50% retrace.

Finally the S&P 500 which has more of a channel structure as opposed to a diagonal, but it works exactly the same although it is not quite as obvious as the rest of the charts.  No technical damage as of yet, but I fully expect that to change early next week.

All in all it seems the markets want to do some correcting, so it would be best to stand aside for the time being if you are of the bullish sort.

LATE NIGHT RAMBLINGS

From a simplicity standpoint, this chart speaks volumes to me.  The contained price action within the channel virtually screams that we have not had a fourth wave to any major degree as of yet, which would also give weight to the nested, not third wave unwinds in the NYA and the SPX.  However, we are smack in the middle of the zone where a wave C extension from the 2011 lows (green 2/B) would separate itself from a full blown third wave rally which would be just shy of 5000 on the Nasdaq Composite.  I would be very comfortable stating that I believe this year will be capped by the 138% mark noted in the extensions table and unless you are a trader, you might as well chalk the entire year up as 'no growth' to your portfolio.

BEARS BLOW IT................. HUGE!

The complex corrective structure on the RUT played out perfectly with a 1% gap down, but after that, the bulls showed up en masse and put a floor under the market and added a rocket to price action.  Ultimately the RUT exceeded the 1144 line in the sand for a nested decline set up and locking in a three wave decline.  I had ditched a more bullish interpretation of the SPX a couple of weeks ago when the decline got deeper than I had anticipated.  As a fault of my own, I didn't wait for the count to prove itself invalidated by overlapping a point that would violate the rules that govern Elliott Wave structures.  The NYA was the chart that had me favoring the original more bullish interpretation as a result of the would be wave (3) in the SPX failing to make new highs in the NYA.  Below is a pictoral of the discrepancy.

 

TARGET TAGGED AND REVERSE

Best laid plans are best laid plans till they go awry.  RUT will be the focus today as it hit the skids right between the numbers we were looking for yesterday (and it is my bus crash mechanism of choice).  Everything was going along great right up until the close where a would be simple minded flat turned into a train wreck that I hate even trying to label.  I genuinely hate complex structures as they seem to never turn out as you'd think, and presently the only thing that is giving a positive signal that it may be right is the fact that the S&P Emini is breaking south from its triangle which I thought for sure was a final fourth wave before a fifth wave higher.

So with that, the all too improbable Double Three Elliott Wave structure has a much higher probability of playing out than I originally gave it credit at the close of business today.  If you are the squeamish sort I suggest you turn your head now because this could get messy.  The nefarious WXY, the Swiss Army Knife of Elliott Waves.  Basically, if we can't figure out what is going on rationally we'll toss one of these in there.  In all seriousness though, this is one of the few that came out cleanly from an aesthetic point of view (mine).  A gap down below 1130 tomorrow morning pretty much seals the deal on the structure and the count.

The bigger picture charts remain unchanged to any degree worth noting so I didn't bother with them.  Good skill.....  I'd call it luck, but a lot of the time they are one in the same.

  

BEAR CAPITULATION?

The bulls went to town again today with another 20pt. run.  Per Zerohedge, this has been the best run in 13 months.  There are a few things that make me skeptical of the run thus far even though it has been rather impressive.  First up is the Russell 2000.  This has been the go to chart for me for the past week or so as it is showing weakness compared to the other indices and has the potential to outperform to the downside if/when this thing lets go.  Needless to say, this is my vehicle of choice when the bus crashes.  It is currently set up nicely with what would appear to be at present a nested wave (2).  Anything above 1144 and I'll have to concede to the bulls on this one.

This was a fun little chart and some keen observation by one Mr. Dundies over at Deep Wave Analytics today.  He noted that every oversold condition on the RSI had been met with new highs since mid year of 2013, except for this one.  Oversold and still a good ways from new highs.

Lastly is our S&P 500 Short term chart.  While an impressive rally, just because it is fast doesn't make it impulsive.  We're coming up on a confluence of things that has a decent potential to kick off our next larger wave C decline into the 1600's.  At the 1827 area we have wave c equaling wave a which is a common Elliott Wave target for corrective waves.  Also in that area there is a gap from back on 24JAN14.  Lastly the 78.6% Fibonacci retracement level also finds itself parked right in the middle of the other two creating quite a coincidence area.  The elevator drop could be special from up here.

A little caution has to be warranted for both sides, so have your gameplans ready and don't deviate.  Good luck peeps. 

NEAR TERM TARGET ACHIEVED

Here we are.  So now what?  It was a very impressive run up from the lows, but until the market shows us it wants to do something else beside the projected path, then we'll stick with it. Sorry for the brevity, but its been a long weekend. 

BULLS SHOW UP TO THE DANCE



The bulls showed up today in force like we were looking for.  However, now is really not the time to get complacent on a rally, because if this thing wants to turn south in a hurry, this would be the place for it.  A simple abc correction complete in this area would imply another nested wave to the downside.  Also of note is the upper channel boundary coming into play.  

The Russell 2000 has only put in three waves from its all time highs so we need to be on the lookout for either a more complex fourth wave or nested waves to the downside.  The bounce relative to the S&P was relatively muted, so it has the potential to put in a lower low on a retrace of the other indicies completing its five wave sequence down.

BOTTOM IN. REALLY?

Letting the price action come to us worked out nicely as we had one more low left floating around.  The new low in the S&P lined up nicely with what appeared to be incomplete structures in both the Nasdaq Composite and the Russell 2000 which now seem complete with today's price action.  Expectations from here are a retrace back towards green ii/b and 1800. 

BOING!

We got the bounce today we were looking for after yesterday's scary decline, but now the question is was this just a bounce in the fifth wave or is this a much larger correction that is starting out? At present there isn't enough price action to make a definitive choice, so we'll leave it up to Mr. Market to fill in the void and give us more clarity.

EXPECTATIONS MET AND THEN SOME

Dip buyers worst nightmare was what today was.  I would like to give some serious props to a couple of individuals over at Deep Wave Analytics for calling the running flat back on Friday afternoon because that is exactly what expectations for price action following one would look like.  A very weak/failed correction followed by one massive selloff.  With longer term channel support coming up and this being the final wave of the sequence, a bounce should be in order in the coming days if not directly.  Be aware, stay prepared and don't get scared bears, you'll get your turn again after a brief retrace.  Good luck peeps.

Friday Update Postmortem

Well, as always, best laid plans do sometimes get laid to waste and our direct path to a complete five waves down has taken a turn and decided to kill some time.  I'm still looking for the new low, but the path there is going to be less direct from the looks.  Elliott Wave has two structures that I'm considering that continue the direction but eat up time in a much less direct approach.  A diagonal and a triangle.  On the below chart I've outlined my two most preferred paths to complete five waves down from the all time highs and I've also included a couple textbook diagrams of the structures.  Although there is some potential for some continued upside from this point I'm currently not favoring it.

Here is the Friday morning squiggle update.  I'll likely start posting these at night after market close so I have more time, but since this is the first in hopefully a long line we're doing it first thing.  SPX short term expectations are looking for a new low before a more sizeable correction or run back to new all time highs.  As you can see from the green shaded area on the short term chart we are firmly planted in the target zone for what is know in Elliott Wave terms as a 'flat'.  Below is a textbook drawing of a flat and the squiggle count on the actual chart.

INTRO

I'm still working out the kinks of the layout and whatnot, so bear with me.  Anyway, lets get down to things here.  I'm ultimately a bit of a hack market analyst who just happens to be pretty decent with Elliott Wave.  So lets get the ball rolling with a little S&P action.  We had a nice run in 2013 especially considering anyone with a pulse who managed to hit the buy button on January 2nd nailed the bottom for the year.  I think those souls are going to be sorely disappointed this year as we are looking at a much more choppy environment.  So one is going to need to be more of a trader this year then just a blind BTFDer.  I'm still on the fence as to whether we have completed all of the third wave coming up from the 2011 lows, but if we haven't, we are only one direct new ATH away from having a good solid correction if not immediately.  If green box iv? lets go I have zero doubts we'll be visiting yellow box 4? within the next couple of months.  Any mainstream analysts looking for the 1600's this year?  I didn't think so.  

If you haven't heard about the carry trade yet or know what one is then you are going to want to read up on it, because that is going to be the theme for this year.  Carry trade unwind.  When they do, bad things happen.  The USD/JPY is either complete here as a full impulse wave up or it is one wave away from being complete.  This pair just happens to be the same reason that markets are going to have issues.  Hedgies and Banksters alike have been using the Yen as a 'cheap' currency to lever up to buy all kinds of equities goodies, but as the Yen appreciates, wholesale selling across markets to get out of the Yen is going to take place at best, or already started at worst. 

It is getting late and I just wanted to get something up on the first night of operation.  Catch up with anyone who stumbles across this later and has a comment.  G'night.