Market Wrap for August 17, 2010

Just a short note here tonight. Today may have marked the end of wave (ii) purple right in the area of our Fibonacci cluster points. Getting below 1083.25 would bolster the case that wave (ii) had indeed ended.

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Pre Market for August 17, 2010

Early action in the overnight session is progressing as anticipated in an upward fashion. If the current rally is to unfold in a simple zig-zag, then the target(s) for the completion of wave c of wave (ii) is:

wave c = wave a @ 1087.25
wave c = .618 wave a @ 1081.75 (already reached)
wave c = .,618 wave a past wave a @ 1089.71
wave c = 1.618 wave a @ 1096.25

As a reminder... from last night's Market Wrap, I mentioned possible targets of at the gap between 1090-1096 and the .618 retracement at 1103. Together these represent our "Zone" for the termination of wave (ii).

Let's see what unfolds.

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Market Wrap for August 16, 2010

For the pre-market commentary, I warned about the possibility of trending price action and a reverse during the same day. Examining the move down off the open, it appears that wave (v) has been struck but the powerful reversal never materialized. I have relabeled the wave sub structures to better reflect the size of the decline. Nothing changes the larger degree trend. A failure to hold 1066.25 (critical support) would indicate that wave (i) was still extending.

Minuette wave (ii) is currently unfolding. Since the most common retracement for a 2nd wave is .618, the target is 1103.75 (+/_ ). Attaining this level isn't an absolute requirement.  My minimal expectation is for the gap between 1090- 1096 ( +/_ ) to be filled.

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Pre Market Analysis for August 16, 2010

In the weekly wrap I mentioned, "For the early part of next week, I'll be looking for the completion of wave 1 of 3 (blue), then a retracement for wave 2 of 3."

The overnight session hasn't shown its card but we will be relying on the wave count to provide our directional bias which remains down.  On Friday we had an "inside day" on a daily chart of ES1. Inside days often lead to trending price action. So be alert to this possibility. What a trader needs to be aware of is that trend days can reverse during the same day and lead to a powerful move in the opposite direction.

Examining the current move down, the wave count is mature... meaning that we are in wave (v). Most of the decline is done; therefore, there is limited downside potential and greater risk of a countertrend move.

Best of Trading

Elliott Wave Live: Weekly Wrap for August 9 - 13, 2010

The Market spent most of the week falling in an impulsive manner but it doesn't appear that we have a completed wave 1down from 2 (blue). At the daily chart level, price has yet to break the trendline. Doing so would add the the bearish case. Final confirmation that wave 2 blue has indeed ended occurs on a break of critical support (1053).  

For the early part of next week, I'll be looking for the completion of wave 1 of 3 (blue), then a retracement for wave 2 of 3. There represents a low risk entry for a significant decline of wave 3 of 3.

I'll calculate some preliminary targets early next week. Until then...


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Elliott Wave Live: Pre Market for August 13, 2010

Last night I gave the game plan for today's trade. Price has almost reached 1091.25 but allot can happen between now and 9:30 est. Let's see what develops.

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Elliott Wave Live: Market Review for August 12, 2010

Last time I left you with the following comments, "Odds are that we have a gap down opening and complete the third wave, then look for 4th wave with choppy price action before a final thrust down to complete wave 1 of 3. ". That's exactly what we got.

Here's what I'm looking for wave (iv). I expect that price will retrace to .382 in an impulsive manner, counting 5 waves, followed by a decline to complete wave (v) of 1 (red) of wave 3 down. If the count isn't complete by 1091.25, the possibility can't be ruled out that wave c= 1.618 wave a @ 1099.5.

The Fibonacci targets for the final push lower are provided but are only applicable if the wave (iv) terminated at 1091.25.

Looking at the 15 minute chart, I've shown a zig-zag set up where wave a = wave c at 1091. 25. The pattern should be as symmetrical  in slope as noted by the cloned blue lines. Should the market print below key support, all bets are off.

Let's see what develops overnight. It is also possible that wave (iv) could develop into a more complex correction negating this outlook.

Best of Trading.

Elliott Wave Live: Pre Market For August 12, 2010

The pre market session indicated further weakness as the third wave down looks to be incomplete. Odds are that we have a gap down opening and complete the third wave, then look for 4th wave with choppy price action before a final thrust down to complete wave 1 of 3.

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Elliott Wave Live: Market Wrap for August 11, 2010

I had been calling for a possible move beyond the June peak. It didn't happen. Yesterdays and today's strong selling pressure , the subsequent break of critical support (1103.75) and bearish technicals combined with a bearish ending diagonal ( wedge) have set the stage for a wave 3 decline that should take price to new lows for the year.

Ending diagonals make quick retracements to the origin of the pattern which is 1005.5.  The reason for this quick decline is because with each peak (waves 1,3,5) leading up to the termination point, buyers stepped up. Most bought at or near  the last high  in anticipation of the breakout. Their stops are below each swing low. Each break of a previous swing low traps more bulls as their stops are hit. This should add to selling pressure. I'll be looking for continued selling and confirmation of five waves down at the most common initial retracement for wave 1 of 3 down at 1051.75.

Best of Trading

Elliott Wave Live: Pre Market for August 11, 2010

The market is at a key juncture. The ON (overnight session) is trading heavy and price has reached critical support that I established at 1103.75. A failure to hold support adds to the increasing key evidence that the rally is over. They are:

1. The Dow was the only indice to take out the June high. The S&P and Nasdaq failed to confirm this move.
2. The S&P and Nasdaq exhibit ending diagonal patterns (terminal patterns) that have not significantly resolved to the upside trend line... accompanied by a volume spike and higher breath. Only on rare occasions does a final 5th wave of an ending diagonal not reach the upper trendline or result in a throw over of that trendline.
3. Analysis in both Time Cycles, Fibonacci Time Ratios and Fibonacci Time Extensions provided the following dates for termination at the daily and intraday chart level (+/-) 1 trading day : 8/10, 8/11, 8/16, 8/17, 8/18.

Bottom line - The S&P and Nasdaq markets need to reach new recovery high or a near term top is in. If they don't we'll be looking for confirmation that wave 3 down was underway or if another pattern had developed

Elliott Wave Live: Market Review for August 10, 2010

The early morning call worked like a charm with a move down to 1112, then a large retracement. It remains to be seen if a new recovery high can be struck or if wave 2(blue) has ended. This leaves the current interpretation of the wave count from 1103.75 open but the ending diagonal and its structure is still intact. All Fibonacci targets remain in place.

At this point, I'm moving key support to 1108.25. If prices breach this mark, then something is wrong with my count. I'll set critical support to 1103.75. A break here would add to the near term bearish case.

Best of Trading

Elliott Wave Live: Pre Market for August 10, 2010

Early action is down ahead of the FOMC announcement of US interest rates. There's allot of buzz out there as to whether the FED will confirm that the US economy has slipped. Will they lower rates through quantitative easing programs? Who knows. The wave count is or guide.

Here a possible scenario (see chart) that could play out before the FOMC announcement at 2:15 p.m. A decline to complete an expanded iv wave of v of C (red), to the 1.382 reverse fib. extension (1114.75) or a test of the lower boundary of the diagonal (1112.5),  followed by a rally to complete wave 2 (blue). Allot could certainly happen between the time of this post and the market's open to negate the possibility.

Although less accurate, I thought it might be interesting to post the Fibonacci time relationships and Time cycles for wave 2(blue) and the current C (red) wave. Keep in mind that these projections are +/- (1) trading day.... meaning  the termination of wave 2 (blue) or wave C are +/- (1) trading day for each date given. This information should only be used as a confirming tool, rather than an absolute.

Possible Dates of Termination

Wave 2 - 8/17/2010

Wave C - 8/10, 8/11, 8/16 or 8/18


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Elliott Wave Live: Market Wrap for August 9, 2010

The market continues to advance and there is no change in the near term interpretation... i.e. that the current rally is close to completing. The key to calling the top is counting a completed 5 waves up from b (circle) that terminates near or at one of the Fibonacci targets provided over the past few posts.

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Elliott Wave Live: Pre Market for August 9, 2010

The ON session is up slightly.  The FOMC conducts its policy meetings with an announcement on rates due on Tuesday at 2:15 p.m. Typically the markets are quite before the announcement.

From the weekly review post, the wave count suggests that the upward correction has not run it's course. Here are additional EW Fib levels and color codes created from the intraday 60 minute chart.

Red- wave c =.618 wave a @ 1129.5
Green- waves (i) - (iii) = .618 @ 1133.5 (Golden Section) of the entire wave 2.
Blue- wave c = wave a @ 1145.25
Purple - wave (v) = .618 wave [(i)-(iii)]@ 1153.5

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Elliott Wave Live: Weekly Review for August 6, 2010

A Lazy Affair

The market finished the week on another low volume affair. When we last spoke, I was looking at what appeared to be a triangle forming on the daily chart. The decline that I anticipated carried well beyond 1118 thus eliminating any further possibility of said interpretation.

Corrective waves are always tricky because the pattern(s) and count can be complex in nature. Often, the pattern and count isn't identifiable until the wave structure has completed. Identifying the wave structure from the low of 1006 has been challenging. So stepping back, let's look at the big picture and work or way down to the daily level.

A Head & Shoulder Top?

The first chart is the weekly continuous combined contract for the S&P. I have identified a possible H& S pattern. The right shoulder (RS) appears to be building in a 3 wave structure. Notice that 1146 is resistance where Wave A = Wave C. This resistance is also chart resistance from the high of the Left Shoulder. 

Turning our attention to the daily chart level, I am currently working two scenarios  ( a double 3: W-X-Y) and ( an expanding flat with a wave C diagonal) for the current advance. Here's the charts for both for everyone to review.

I have mentioned them at nausea so I'm not going to review the reasoning behind the labeling of the charts. What's important to know is that it doesn't matter which way you label the chart at this point. Both interpretations have the same implications when completed and offer similar targets for the termination of wave 2 (blue).

Targets For Wave 2 Termination

The key EW resistance levels to watch for next week are: 1136, 1143-1149.25. 1152.85 - 1156.25. I will post the wave C diagonal fibonacci clusters before the market opens on Monday. Together, they should give us areas of confluence that coincide with the larger time frame analysis.

Where Are We Wrong?

On the daily chart level, a break below the lower trend line and a break of key support of 1084.5 would mean that the current wave labeling was incorrect. A break of 1053 would most likely mean that wave 2 (blue) had ended. 

Best of Trading 

Elliott Wave Live: Pre Market for August 6, 2010

There is no change from last nights post as market participants are hesitant to place any large bets before the US "Non Farm Payroll" report. Futures are flat.

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Elliott Wave Live: Market Wrap for August 5, 2010

We didn't get the push up that I anticipated as the market continues to consolidate just below the June high. On the daily chart, the last three days look like a running triangle may be forming. The d wave may have completed at today's close. If so, I'll be looking for a minor decline to around 1118 area to complete the e wave ... setting up the final wave v of C of minor wave 2 advance.

Best of Trading

Elliott Wave Live: Pre Market For August 5, 2010

The ON session tested 1127.75 and failed. The June high was 1129.5 on the continuous contract. Jobless claims jumped by 2,000 and the market sold off.  I'm looking for confirmation that a top is in place... meaning 5 waves down, followed by a 3 wave counter trend rally. Traders may want to consider short positions should this occur.

Best of Trading

Elliott Wave Live: Market Wrap for August 4, 2010

Searching For A Top

I've just returned from my trip to Denver and I"m ready to get after the Market again. If you recall, I offered two wave counts in my July 25, 2010 post. Rather then recreate them, I recommend that everyone read that post again as it provides a game plan for a breach of 1127.5. I feel this level may be taken out tomorrow. The post is found in the July achieve (see the right side corner of bottom of the blog).

One word of caution. The current rally is getting tired as measured by many indicators. It is ripe for failure. Could the market extend further? Yes but 1127.5 is a previous 4th wave, so one needs to be looking for possible failures tomorrow.  If the market penetrates 1127.5 cleanly and with upward thrust, then the next target is in the vicinity of 1136.

Best of Trading!

Elliott Wave Live: Mid Day Review for Aug 2 , 2010

A new month and minor wave 2 on the daily chart hasn't completed. Other market pundits felt that wave 2 ended on July 30, 2010 in a truncated 5th wave of c at 1113. The truncation can best be seen on a 60 to 120 min chart. I wasn't sold on that analysis as it seemed to be a stretch given the overlap of waves down from the peak that followed.

Today's gap up and subsequent rise above 1117.75 removes the possibility that wave 2 had ended. Price remains within channel lines established between 1006 and 1053 (bottom channel) and the parallel upper channel at 1096. This is the signature of a corrective wave. Until the lower boundary is broken, I can't see getting overly committed to the downside here. While I have labeled the corrective structure unfolding as a Double Zig Zag, my confidence in the count is still questionable. Other possible counts exist with upside potential. Therefore, the trend is up and we should not fight it. So plan on further upside potential near term. As soon as a more definative wave count can be established, I will make a post.


Best of Trading!