Happy New Year!

That's about what we got today ; )

... or still underway?

SPX: Since the market almost dropped to the possible wave iv low (see my last chart) it's also possible that wave iv is still underway:

Not what I hoped for the last day of the year.. but if they don't wanna close green there's nothing I can do... : )


Edit (10:40 AM): We are now below the point where I thought wave iv had ended. So, the count above looks really nice. Wave (A) should bottom anytime soon. Then wave (B) might take us back to 1125/26 and afterwards wave (C) should complete wave iv around 1118/19.


Edit (11:20 AM): May be this was it. (A)-(B)-(C) completed. (It could also be just wave (A)) Whatsoever, I'm not going to try and pick the bottom of wave iv.

I might chime in later today after the close. If not expect the next update to come in the new year.


Happy New Year! : D

Elliott Wave Update 30 December 2009 ~ Wave iv already finished?

SPX: The market opened lower and started to rally when the PMI was reported. After closing the gap it randomly moved up and down for the rest of the day. All in all a very interesting trading day...

When I posted the triangle yesterday I first thought that this is some part of wave [X]. But since the SPX broke the pattern to the upside and not to the downside as expected wave iv might have already finished.

A new high today would very likely confirm that wave v started. I expect wave v to end when it hits the middle trendline in early January.

Triangle?

Possible triangle:

Short term count update

The market dropped below 1123,5. Hence, my short term count from yesterday was wrong. It seems as I was a bit too bullish... : )

I'm going to post a new count in a few minutes.

May be I was right in the beginning to place wave (b) at 1086 on December 12th. What I don't like is that wave iii is really short but since wave [5] extended in wave iii it's very likely that wave v will also extend.

Edit: I added an alternative count if the the rally right now keeps going higher and makes a new high in a few hours.

Good luck in this crazy market : D

Elliott Wave Update 29 December 2009 ~ 7 gap ups in a row!

SPX: The market gapped up (yes, again!) and began its common correction shortly after the open. Then, it just went sideways for the rest of the day an sold off into the close.

The morning rally completed submicro wave (1). After that wave (2) started and lasted for the rest of the day. So far, everything fits in with my count. However, I expected wave (3) to begin today and that obviously wasn't the case. Thus, first doubts came up whether my pretty bullish count is correct.

But may be they just wanted to see a red close after six consecutive up closes and wait with the big up move till tomorrow ; )

We'll see... If the market should drop below 1123,5 tomorrow I'm gonna post another (less bullish : )) count. But also then I expect at least one more high over the next few days.

Enjoy the last days in 09!

struggling at 1130 (so far : ))

SPX: The market gapped up (AGAIN) and finished submicro wave (1) at 1130. The current consolidation should be wave (2).

A drop below 1123,5 would invalidate my short term count while a new high would very likely confirm it.

Elliott Wave Update 28 December 2009 ~ micro wave [1] and [2] completed

SPX: The market opened higher again and hit 1130 a few minutes after the open. After that the correction began and bottomed at 1124 in the afternoon. From there the SPX rallied into the close.


As I've written in my weekly update I replaced the (b) wave. This has some consequences for the short term count: I have to raise the wave degree by one; e.g. submicro wave (1) in the old chart is microwave [1] in the new on.

So that you're not totally confused : ) I'm going to post both charts, the old one from Friday and the new one ; ) (but in fact it's exactly the same, just the wave degree is different ; ))


The old one:



The new one:



As expected on Friday the market opened higher and finished micro wave [1] shortly after the open. Then, micro wave [2] unfolded in a simple zigzag and bottomed about 90 minutes before the close.

Micro wave [3] should now be underway with a target of 1145 within the next few days.

Afternoon rally?

SPX: So far, the morning is similar to Dec 22 and 23. If that continues we should see a rally into the afternoon.


Edit: Forget it.. let's concentrate on the Elliott Wave count. So far, we got an A-B-C down and might have already completed wave (2)

Elliott Wave Update Week 52 2009 ~ end of year rally underway

I hope you had wonderful days together with your family. : )

SPX: Even though the week was shortened the market has finally managed to break out of the channel it has been caught since early November.

I've already mentioned it several times, that I have some problems with the correct wave degree in the short term count. The reason for that is wave (b). Already in my Update for Week 51 I wasn't sure where to place (b).

As you can see in the chart there are three possible places for (b). The first (b) would make the correction a simple flat, the second one a double three and the last one a contracting triangle.

While all of these wave patterns are very common I think the most likely one is the triangle. Wave (a) lasted 11 trading days. So, let's say that wave (c) also lasts 11 trading days. Taking the triangle (b) wave low (1094 on December 18th) and adding 11 trading days we get January 5th 2010. That's exactly between the two dates I expect the top.

So, from now on, I'm going to place wave (b) at 1094. The target for wave (c) though remains the same.

Have a nice last week in 2009 ; )

Nasdaq: Top at 2340 in the first week of January 2010

Nasdaq: Nope, I'm not crazy : D. Actually, I wanted to present you with a normal Nasdaq chart and explain why it is so difficult to find the correct wave degree.

But I didn't count on Mr. Fibonacci: While I was looking at the chart I realized that there are some very nice fibonacci relationships between the waves.

So, with the aid of Mr. Fibonacci, I can tell you the date when and the price where the Nasdaq will peak:

As if it's not enough my cycle also peaks in the first week of January 2010.

Btw, if the top won't occur in that week and not around 2340 blame Mr. Fibonacci for that; and if the top will occur praise me ofc : D ^^

Edit: In the very same week Primary [2] will be 0,618*Primary [1] (time)

Elliott Wave Update 24 December 2009 ~ Merry Christmas!

SPX: The market gapped up again (the fifth day in a row!) and closed at the high of the year at 1126.48.

As it looks now, micro wave [3] started at 1116 on Wednesday. So far, I can count four waves of the first subwave, thus, submicro wave (1) is likely to finish on Monday.

I'm not completely sure if the wave degree in my count is correct. I'm gonna talk about that tomorrow/on Sunday in my weekly update.

Season's Greetings!

Elliott Wave Update 23 December 2009 ~ pre-Christmas excitement

SPX: Today was pretty similar to yesterday: gap up - new year high - 5 point drop - secondary high in the early afternoon and another smaller correction to end another very exciting trading day.

And here it is..... the most bullish count I found as a Christmas present for you : )

As it's the end of the year and everybody seems to be uber bullish, today's correction to 1116 might have already completed micro wave [2]. In this case, the market mustn't fall below 1116 and just continue to rally towards 1160ish into New Year.

I know that we're heavily overbought and all that but it's Christmas time and the Dollar looks like it has started its correction. So, anything is possible ; )

Hope you've bought all your presents ; )

Merry Christmas!

Elliott Wave Update 22 December 2009 ~ micro wave [1] topped

SPX: Right after the open the SPX made a new high at 1120 near the 50% retracement level - ...well... and that's everything one can tell about today's market action.

As mentioned in the update right after the open, micro wave [1] topped at 1120. From there the market started its correction. So far, we've seen a 5 point drop labeled as wave (A) followed by a rally in the afternoon labeled as wave (B). Tomorrow I expect wave (C) to unfold and end around the wave (4) low to complete micro wave [2].

After that, the rally should resume and continue to make new highs till the end of the year.

new year high

SPX: The SPX gapped up again and almost touched the 50% retracement at 1121.

Since Friday it has formed a nice impulse to the upside, that I think is in its final stage now. Its subwaves have some nice fibonacci relationships: wave (1) = wave (5) = 0,382*wave (3), so actually a perfect impulse with an extended third wave.

From here I expect us to drop till the end of the day or even tomorrow. Since it's a wave iii the retrace might be only shallow, so a possible target is the wave (4) low.

Elliott Wave Update 21 December 2009 ~ green X-mas

SPX: It seems as I'm not the only one who likes fractals: The market gapped up and rallied as if it was told by the fractal : )

The very short term count is not that clear. It's very possible that micro wave [1] topped today and we are in wave [2] to about 1105 till tomorrow/Wednesday. But it's also possible that the market will make a new high tomorrow morning and then start to drop.

However, it looks like we'll get green X-mas (well not outside ; )) and that the top won't come until early January 2010.

fractal power!

SPX: The fractal I posted yesterday is spot on! : D Let's hope it's not just a flash in the pan but the beginning of the end of year rally ; )

Today's high currently at 1114 near the upper channel resistance. Let's break out!

You should book a trip to the USA now and not tomorrow

USD/CHF: If you're one of them who used to import cheap US-Iphones or stuff like that to Switzerland to sell it here for good money you might have to stop it next year as the USD started a new uptrend three weeks ago. ; )

The next correction (if there will be one ; )) should be a good opportunity to buy Dollars with a stop at the low (0.99). My upside target for Primary [C] lies around 1,30 and should be reached somewhen next year or in 2011.

So, that's all for today ; )

Have a nice week, will be at home and able to post updates with charts every day from now on.

Cheers,

Hugo

Elliott Wave Update Week 51 ~ still 1160ish

SPX: Another very exciting week - so exciting that I don't even know what to tell you... Well, the most important thing was that the rally I expected didn't occur.

Already on Tuesday I mentioned that my short term count might be incorrect. Two days later I got confirmation that the count was incorrect and the rally will be delayed.

On Thursday when the markets were heading lower I changed my preferred count: The top of wave i/[1] is now at 1115 (Dec 14). From there the market corrected in a wave ii/[2]. On Friday wave ii/[2] should have bottomed and wave iii/[3] started. That's supported by this fractal.

Primary count: in Subminuette iii of (c) of [v] of C of (Y) of [B]/[2] (Look here for wave degrees)

Bullish fractal

SPX: That's the fractal I spoke of. Should the market continue to follow the fractal we should see a nice rally on Monday.

The Elliott Wave Weekend Update will follow in a few hours. ; )

Elliott Wave Update 18 December 2009 ~ getting fractal support

SPX: Another day that won't go down in stock market history... Still between 1085 and 1115, still in the channel for the sixth week now and still astonishing everybody how boring it can be to watch the stock market these days.


There is one point however, that supports my bullish count that we are finishing or have already finished wave ii/[2] and are now in the beginning of wave iii/[3]:

If you compare the market action between December 7-9 and 16-18 you can clearly see the similarity of these two fractals. So, if you look on December 10 you'll know what I expect for Monday. I'm gonna post a chart on that on Sunday evening ; )


Hope you made some nice trades this week!

Have a nice weekend ; )


Cheers,

Hugo

Elliott Wave Update 17 December 2009 ~ Still in the channel

SPX: The market couldn't break above the upper channel resistance around 1115. It turned down and is nearing the lower trendline at 1085ish again.

With today's breakdown my preferred count was invalidated. But the other count I mentioned on Tuesday looks now better than ever: Wave [1]/i was completed on Monday and since then we've got an Expanded Flat for wave [2]/ii which retraced about 62%. So all in all quite nice but since the short term waves are a bit messed up it might be better to wait for a channel break. Either a break below 1086 meaning the top is in or a break above 1116 in a wave 3 to make the top around Xmas/new year.

Charts

I was asked when I'll post charts again. Unfortunately I'm not at home this week and can't make charts. Expect the next charts in the weekend update ; )

Futures btw are looking great : D

Elliott Wave Update 15 December 2009 ~ waiting...

SPX: Today's correction closed the gap the market created on Monday and is now ready to rally on.

At the moment my preferred count is still possible:

Today's action was submicro wave (2) of [3] of iii. That would mean that tomorrow should be rally day.


However, I can see now a little different count in which we completed micro wave [1] yesterday and are now in [2]. In the end we'll get the same but the rally would just be a little bit delayed.


The magic number the market mustn't break for both counts is 1086. So, as long as it stays above I expect 1160 in the near futur.



Tomorrow is FED day btw, so expect the common increased volatility.
May be it's the perfect day for a big rally? : D

Elliott Wave Update 14 December 2009 ~ The rally started

SPX: The market is stronger than I thought. Micro wave [2] didn't reach my targets in terms of price and time. So far it looks like the correction on Friday was all we got from wave [2].

The SPX should reach 1140+ in micro wave [3] and all that within a few days possibly already by the end of this week.


That's all for now. ; )

Cheers,

Hugo

Elliott Wave Update Week 50 ~ 1160ish

SPX: I don't have much to add to yesterday's update. The bear market rally seems to be in its final stage and I still expect the top to be around Xmas.

At 1159 Intermediate wave (Y) equals (W) and at 1168 (a) has the same length as (c). So, I expect the top to be around 1160.

I'm sure you've seen some different Triple Zigzag counts for the rally since March. All I can say is that also these counts are also possible and correct. The best thing though is that also in a Triple Zigzag count a last upwave is still missing. And wave relationships suggest a top around 1160 as in my Double Zigzag count : D

Tony over at caldaroew.spaces.live.com/ wrote a very good weekend update and explained why he thinks that 1160ish should be the top. I really recommend to read it. ; )


Have a nice week,

Cheers,

Hugo

Elliott Wave Update 11 December 2009 ~ micro wave [2] underway

SPX: On Friday, the SPX gapped up again and hit some minutes after the open the middle trendline of the channel to complete micro wave [1]. After that the correction began (micro wave [2]) that should last till early next week.

Micro wave [2] should end around the 50-62% retracement level. From there wave [3] should start and hit new highs (1130-40) later next week.

Primary count: in micro wave [2] of iii of (c) of C of (Y) of Primary [B]/[2] (I suggest to look on this chart if you're not so familiar with wave degrees : D^^); 1086 mustn't be breached

From now on I will add "Elliott Wave Update Day Month Year" in every title of my daily updates. With that it's easier for you to find earlier counts by just searching the blog or the blog archive in the sidebar looking for the right date.

Have a nice weekend!

Cheers,

Hugo

5 waves up completed

With today's high at 1108 the SPX should have completed micro wave [1]. Blue wave (5) would equal blue wave (1) at 1109 so that's near enough for me to sell my position.

So, now I expect a decline to 1095-1100 to form micro wave [2].

Elliott Wave Update 10 December 2009 ~ I want my X-mas rally : D

SPX: Well..., we got the gap up but nothing more. The SPX traded the whole day within a range of only 6 points.

So far, it appears that the market is still in micro wave [1] of iii. That means that the main part of this rally ([3] of iii) should follow next week.

What concerns me a bit is that the bearish count is still alive. As I mentioned yesterday, 1119 could have been the top of wave (c) and of this bear market rally. If that's the case, the diagonal to 1086 would be a leading diagonal in the wave i position. From there the market corrected in three waves exactly to the 62% retracement level, the common level for a wave ii. So, 1084 would be wave i, 1106 wave ii and wave iii would follow tomorrow.

Primary count: in iii of (c) to new highs (1086 should hold)

Alternative count: topped at 1119 (in iii of (i) down)

Gap up!

I told ya so : )

Let's see if the market can skip the gap close and just creep higher to new highs : ).

I've just posted the Elliott Wave Labeling Key I use. If you follow Dan or Kenny you might have noticed that it's their labeling key.

Sure, I could have changed the colours so that I'd have an own key with different colours. But I thought it may be easier for everybody if all the Elliott Wave bloggers out there would use the same colours. So I set the ball rolling may be others will join...

Edit: btw, the link (Elliott Wave Labeling Key) in the sidebar on the right works now.

Edit2: added approx. duration for the important waves

Elliott Wave Labeling Key

Below you see the Elliott Wave Labeling Key I use. It's the common way of labeling the waves. However, circles can only be used in charts, so otherwise they are replaced with brackets [ ].

Wave Degree

5's with the trend ~ 3's against the trend

Approx. duration (bull/bear)

Grand Supercycle

[I] [II] [III] [IV] [V] ~ [a] [b] [c]

centuries/decades

Supercycle

(I) (II) (III) (IV) (V) ~ (a) (b) (c)

decades-centuries/years-decades

Cycle

I II III IV V ~ a b c

years-decades/years

Primary

[1] [2] [3] [4] [5] ~ [A] [B] [C]

years/months-years

Intermediate

(1) (2) (3) (4) (5) ~ (A) (B) (C)

months-years/months

Minor

1 2 3 4 5 ~ A B C

months/weeks-months

Minute

[i] [ii] [iii] [iv] [v] ~ [a] [b] [c]

weeks-months/weeks

Minuette

(i) (ii) (iii) (iv) (v) ~ (a) (b) (c)

Subminuette

i ii iii iv v ~ a b c

Micro

[1] [2] [3] [4] [5] ~ [A] [B] [C]

Submicro

(1) (2) (3) (4) (5) ~ (A) (B) (C)

Miniscule

1 2 3 4 5 ~ A B C

Note: This color combination belongs to Dan and Kenny.

Elliott Wave Update 9 December 2009 ~ That might be the start

SPX: After the market almost hit 1084 in the morning it turned back up and rallied into the close to end the day at 1096. This afternoon rally could have been the start of my long expected rally to new highs : )

The following chart supports this view:

If this pattern (some kind of a double bottom followed by a strong rally) continues to happen we should see a gap up tomorrow.

Looking at the past days, the decline from 1119 to 1086 looks a bit like a diagonal. But unfortunately this doesn't really help because it can either be a bullish ending diagonal or a bearish leading diagonal (only FED knows which one's the correct one : )).

Primary count: in (c) of [v] (last up wave)

Alternative count: already topped at 1119 (confirmation below 1029)

EUR/USD: The EUR/USD completed five waves down and is now in a corrective wave (ii), which might correct all the way up to the 62% retracement level.

A weaker dollar (rising EUR/USD) in the next few days would also support my SPX count suggesting a rally in the stock markets as I don't expect that the correlation will suddenly stop today or tomorrow.

Primary count: the Dollar bottomed (EUR/USD topped) in November and finished its first wave up (down)

Elliott Wave Update 8 December 2009 ~ no strength so far

Today the market dropped below Friday's low invalidating my very short term count from yesterday. But as long as the SPX stays above 1084 I will stick to my count, which says that pink wave (b) ended at 1084 last week wave i of (c) topped at 1119 on Friday.

So, tomorrow we should finally get the promised rally to a new high above 1120. Should the market drop below 1084 however I'll have to change my count and I might replace the pink wave (b) low or even mark 1119 as THE top.

Have to wait for the waves first ; )

Good luck!

Elliott Wave Update 7 December 2009 ~ Wave (c) not yet confirmed

Hi guys

Im now able to write daily updates again :) (unfortunately without pictures)

as mentioned in the weekend update wave (c) is possibly underway. It looks like today's high was wave (1) of 1 of iii of (c) and today's low wave (2). That means that wave (3) to 1125 should follow tomorrow.

Elliott Wave Update Week 49 2009 ~ The beginning of the X-mas rally

SPX: Quite a volatile week especially on Thursday and Friday with two strong selloffs. Even though the market was able to close the week above 1100 for the first time this year.

My Elliott Wave count is still spot on for the second week in a row. : ) As expected last weekend the rally resumed and made a new high near the 50% retracement level. I count last week's rally from 1084 to 1119 as a wave i of (c) and the drop from 1119 to 1097 (a perfect 62% retracement of wave i) as a wave ii. So, next week wave iii should follow and reach 1150+.

Although I expect the top to be around 1160 it's also possible that 1119 was the top as you might have seen it on other blogs. A first indication that the top is in would be a drop below 1084 and a confirmation below 1029.

That's my count for the whole bear market rally so far: A double zigzag. At 1158 wave (Y) would equal wave (W).

Primary count: in iii of (c) of [v] of C of (Y) of [B] - target 1160ish

Alternative count: the market has topped at 1119

USD: For the second time after August the Elliott Wave count for the Dollar looks like it has completed 5 waves down. That would mean that the Dollar bottomed in late November and is now in the early stage of its last rally before it will totally collaps. As soon as this rally is confirmed it should last several months or even years.

This chart shows why I think that the top is still some weeks away. About one year ago the USD bottomed in mid December. That's about three weeks before the market topped in early January. We might get the same picture this year with a bottom in the Dollar in late November and a top in the markets in mid-late December.

Have a nice week guys ; )

Elliott Wave Update Week 48 2009 ~ The magic number stays at 1029

SPX: This week was even more exciting than last week! This week the SPX changed by 0.11 points, from 1091.38 to 1091.49. I'm glad I can't follow the market at the moment lol.



I initially thought that wave (b) could reach the 50% retracement level around 1070 but now it looks like it might have ended at 1084 near the 38% retracement. So, the rally on Friday could have been the beginning of "my" X-mas rally (last week's chart):

There are things though I don't like. One example you can see on the following chart:

These fractals are so similar, especially the October and the actual one that I just have to show it to you. If you're familiar with fractals the October one would be the child fractal and the actual one the parent fractal. If the similarity continues the market should decline heavily next week contradicting my preferred Elliott Wave count.

The magic number stays at 1029. When this level is broken at least an Intermediate top or even THE top should be in.

Primary count: in (c) of [v] of C of (Y) of Primary [B] (last upwave)

Alternative count: 1114 was THE top for many many years (in [iii] of 1 of (1) of Primary [C]), confirmation below 1029

Elliott Wave Update Week 47 2009 ~ 1029

SPX: A very interesting week!: the market closed on Friday where it closed last Friday.



The SPX completed an impulsive wave from the low at 1029 at 1114 near the 50% fibonacci retracement of Primary [A] on Monday. I count this five wave impulse as a wave (a) of [v] of an Expanding Ending Diagonal. Thus wave (b) is now underway with a target at 1070ish. After that the market should climb to new highs around X-mas or a bit earlier to complete the Expanding Ending Diagonal.

A drop below 1029 would invalidate all the short and intermediate term bullish counts and actually nearly confirm that Primary [C] is underway. Furthermore it would match my fractal I posted last weekend.

So that's what I'm waiting for now: a drop below 1029 ; )

Elliott Wave Update Week 46 2009 ~ Spot on! NOT

SPX: After a very good last week, this week wasn't that good. Already on Monday the market opened above the important resistance level around 1075 suggesting that we might see a new high in the coming days.

Two days later the SPX hit 1105.37 making a new high in 2009 and invalidating the bearish count I posted last weekend.

As much as I would like to show you a bullish long term count, I just can't find one. So, there are few bearish options left of which I like the Expanding Ending Diagonal in the C wave position the most. I don't really like it but the other ones are even more crap ; )

Concentrating on the long term picture I spotted a nice fractal: Intermediate (2) of Primary [A]/[1] looks very similar to the current rally since March. It doesn't match perfectly but especially the last four months are very similar.

To sum up, I'm waiting now for a lower low, i. e. an SPX below 1030 to go short. That would confirm the Ending Diagonal Scenario and also match the Intermediate wave (2) fractal.

Have a good week.

Elliott Wave Update Week 45 2009 ~ Spot on!

SPX: As expected last weekend, the market had a pretty good week and hit my short zone around 1070 on Friday. Thus, I think Minor 2 is in its final stage or has already finished at 1071.

As mentioned in the chart, Minor wave 3 should end in the mid 900's making it 1,62 times Minor wave 1. After that, Minor wave 4 and 5 should follow and complete Intermediate wave (1) around 900.

My targets for Primary wave [C] by the way are 466 and 539. So, until the market hits one of these targets, I remain a bear ; )

Primary count: at the end of Minor 2 of Intermediate (1) of Primary [C]

((Alternative count: in Intermediate (B) of Primary [B] ))

Have a good week!

Elliott Wave Update Week 44 2009 ~ Is this a real bear?

or is it just another bear trap?

SPX: Although we can't be certain yet, it looks like the last week could have been the beginning of a new bear.

After the drop below 1075, the blue forecast having been confirmed, the market fell apart (see my chart from Wednesday). Now it looks like the first wave down is completed. The common target for wave 2 is between the 50% and 62% retracement level; if the market moved above it, I would start to worry (if you're a bear ofc).

So, a short trade around 1070 with a stop at 1102 and a target somewhere in the low-mid 900's looks really nice.

Primary count: in 1 or 2 of (1) of Primary [C]

Alternative count: in A of (B) of Primary [B], target for (B) would be around 900

public announcement

Unfortunately I won't be able to do intraweek updates for the next few months; definitely no chart updates, but may be I'll be able to do text updates. I'm gonna let you know as soon as I know it.

But do expect to get a weekend update every Saturday evening or Sunday morning in which I'm gonna cover the intermediate and long term outlook for the SPX and the other markets. ; )

SPX: The picture for the SPX remains unclear. One day we sell off just to rally the other day all the way back up again. So far, it's possible that the bear market rally topped and the game is over but as long as the market doesn't fall below 1070 and 1050 I wouldn't get to excited about going short. It's still very possible that we saw some sort of a flat for wave (b) of an Expanding Ending Diagonal.

So, above 1101 we'll be looking for 1110, 1120 or even a bit higher for the (c) wave. Whereas a drop below 1050ish should confirm a downtrend.

The chart I posted on Wednesday is still spot on and we are now about there where the blue and the orange line seperate.

Have a nice week.

Cheers,

Hugo

It's your choice

Ok folks, I decided to show you both possibilities before the open.

As I said before, the Expanding Ending Diagonal is still possible but for the reasons you see in the following chart, I incline to the Triple Zigzag. ; )


There you go:

Alternative count: today was THE top

SPX: I reworked and relabeled actually the whole second half of this bear market rally. I see now a triple zigzag! The Expanding Diagonal however, is still possible but as you know, I've never really liked it so I looked for another count. ; )

This reworked count is only valid if today was the top! If the SPX goes one tick above today's high I'm back to my Expanding Diagonal.



Primary count: first waves of Primary [C]/[3]

Alternative count: (b) of [v] of an Expanding Diagonal

Edit: Just to make things clear: the Expanding Ending Diagonal is still a valid option, even though it hasn't reached the minimum target yet (it did in the future though!).

It's said that "wave 5 is always longer than wave 3". And I don't know how they came up with this rule because they had like two examples for a EED whereof one was even invalid... So maybe I should just stick to my EED count. I'm gonna post both charts after today's close so that you can choose the one you like more. lol (Till then I might have already decided which one I like more : DD)

1100!

SPX: Today, the market hit 1100 for the first time this year and we are only about 480 points below the all time high : ))

In the chart above you see how I see the rally since 1020. First we've got five waves up making it wave (a), followed by wave (b) and wave (c) currently underway. So far, I can count four completed waves of wave (c). The last wave seems to be still in progress.

I subdivided wave v of (c) into its components:

wave [1] to 1091, wave [2] to 1086, wave [3] to 1099 and wave [4] to 1097. Tomorrow wave [5] should unfold with a possible target of 1108ish.

Primary count: in [5] of v of (c)

Alternative count: none

good and bad news

Bad news first: I've accidentally misplaced the top of wave (a) and the low of (b) of wave [v]. (a) should be at 1071 (on 10/9) and (b) at 1066 (on 10/10).

The good news is that it actually doesn't change anything. The targets remain the same. ; )

P.S. I'm gonna update my charts after the close.

South Africa!

Well, the most exciting thing yesterday was actually that we qualified for the World Cup in South Africa with a not so exciting 0-0 versus Israel.

SPX: Last Friday, I said that I expected wave (b) to be very small, and that's what we've got: wave (b) barely retraced 23,6%.

Now, the market is somewhere in wave (c) which should end very soon, possibly early next week.

Primary count: in (c) of [v]

Alternative count: none

and now?

SPX: Yesterday, the SPX breached the 9/29 highs indicating that an up move to 1120 should be underway. I think wave (a) of this (a)-(b)-(c) move is finished (or just a few points away from being finished).

Thus, I expect (b) to retrace possibly only 23-38% of (a), may be retesting the broken neckline of the inverse head & shoulders.

After that (c) follows and should end in the low 11xx's.




The alternative count you can see in the chart is the primary one from EWI. If the market moves only one tick above 1080.15 this count will be invalid (while a move below 1020 would confirm it).


Tony came up with an alternative bullish count. I really like that one because it doesn't have the problem I mentioned in my post on Wednesday:

"Furthermore the upwaves ([i],[iii],[v]) are supposed to be zigzags, and it's quite hard to count them in that way."

Have a look at Tony's count if you're interested in the exact labeling.

Primary count: in [v] of C of (Y) of [B]/[2]

Great day!

NOT!

I actually hoped that the market rallies above 1070 to make things clearer.

But somehow the market likes to see us suffering so it just chopped around the whole day.

The important levels to watch out for remain the same: 1020 and 1070. If it breaks above 1070 we should see 1120 and if it breaks below 1020 the top should be in.

btw.. Alcoa reported better than expected numbers and the ES is already up by a few points. So this might be the kickoff for the final upleg.

Why 1120?

SPX: As I've already said yesterday, at 1121 lies the 50% retracement of Primary A/1. Moreover, A equals C at 1128 and the target of a possible H&S is at 1120ish (see chart below)

The only issue is, that an Expanding Ending Diagonal (p. 37 in our bible) is very very rare... Furthermore the upwaves ([i],[iii],[v]) are supposed to be zigzags, and it's quite hard to count them in that way.

A move above 1070 should confirm this scenario, whereas a drop below 1020 indicates that we might be in a very bearish 1-2-i-ii scenario.

Expanding Ending Diagonal

SPX: Today's penetration of the wave [i] low indicates that an Expanding Ending Diagonal might be underway. A breach above 1070 confirms this scenario. A likely target lies at 1120, the 50% retracement level.

I hope tomorrow's market action will clarify the situation a bit ; )

The bears need a down day tomorrow...

SPX: Depending on how you label the down waves since the top, wave [iv] has already penetrated the wave [i] low.

However, if you label it like that, the low of [i] is at 1046. So, as long as the SPX doesn't rally above 1046 the downtrend remains intact. Above that level, we must consider to be in wave [v] of a rare Expanding Ending Diagonal possibly hitting 1120 within a week or so.


Primary Count: at the beginning of [v] of 1, target 1000ish (invalid above 1046)
Alternative Count: in [v] of C of (Y) of [B], possible target 1120 (50% retracement) (primary count above 1046, confirmation above 1070)



DAX: So far, the DAX formed a [i]-[ii]-[iii] and [iv] in progress. Wave [iv] has already retraced 38% of wave [iii], so this might be everything we get.

Primary Count: at the end of [iv] of 1 of (1) of Primary [C] (invalid above 5618 before making a new low)

Link List

Just fyi: I added a link list in the sidebar on the right. So far there is only one link (The Elliott Wave Principle) but I plan to add a few more useful links in the next days.




The Elliott Wave Principle (blog post): The main reason why I posted this article is that readers who don't know Elliott Waves get an idea what it's all about. It's just a short summary about its history and its basic rules. If you wanna know more about Elliott Waves, you can click on Basic Tutorial: 10 lessons on The Elliott Wave Principle at the bottom of the article.


Have a nice week! ; )

Cheers,
Hugo

The Elliott Wave Principle

In the 1930s, Ralph Nelson Elliott, a corporate accountant by profession, studied price movements in the financial markets and observed that certain patterns repeat themselves. He offered proof of his discovery by making astonishingly accurate stock market forecasts. What appears random and unrelated, Elliott said, will actually trace out a recognizable pattern once you learn what to look for. Elliott called his discovery "The Elliott Wave Principle," and its implications were huge. He had identified the common link that drives the trends in human affairs, from financial markets to fashion, from politics to popular culture.

Robert Prechter, Jr., president of Elliott Wave International, resurrected the Wave Principle from near obscurity in 1976 when he discovered the complete body of R.N. Elliott's work in the New York Library. Robert Prechter, Jr. and A.J. Frost published Elliott Wave Principle in 1978. The book received enthusiastic reviews and became a Wall Street bestseller. In Elliott Wave Principle, Prechter and Frost's forecast called for a roaring bull market in the 1980s, to be followed by a record bear market. Needless to say, knowledge of the Wave Principle among private and professional investors grew dramatically in the 1980s.

When investors and traders first discover the Elliott Wave Principle, there are several reactions:

Disbelief – that markets are patterned and largely predictable by technical analysis alone
Joyous “irrational exuberance” – at having found a “crystal ball” to foretell the future
And finally the correct, and useful response – “Wow, here is a valuable new tool I should learn to use.”
Just like any system or structure found in nature, the closer you look at wave patterns, the more structured complexity you see. It is structured, because nature’s patterns build on themselves, creating similar forms at progressively larger sizes. You can see these fractal patterns in botany, geography, physiology, and the things humans create, like roads, residential subdivisions… and – as recent discoveries have confirmed – in market prices.

Natural systems, including Elliott wave patterns in market charts, “grow” through time, and their forms are defined by interruptions to that growth.

Here's what is meant by that. When your hands formed in the womb, they first looked like round paddles growing equally in all directions. Then, in the places between your fingers, cells ceased growing or died, and growth was directed to the five digits. This structured progress and regress is essential to all forms of growth. That this “punctuated growth” appears in market data is only natural – as Robert Prechter, Jr., the world's foremost Elliott wave expert and president of Elliott Wave International, says, “Everything that thrives must have setbacks.”

The first step in Elliott wave analysis is identifying patterns in market prices. At their core, wave patterns are simple; there are only two of them: “impulse waves,” and “corrective waves.”

Impulse waves are composed of five sub-waves and move in the same direction as the trend of the next larger size (labeled as 1, 2, 3, 4, 5). Impulse waves are called so because they powerfully impel the market.

A corrective wave follows, composed of three sub-waves, and it moves against the trend of the next larger size (labeled as a, b, c). Corrective waves accomplish only a partial retracement, or "correction," of the progress achieved by any preceding impulse wave.

As the figure shows, one complete Elliott wave consists of eight waves and two phases: five-wave impulse phase, whose sub-waves are denoted by numbers, and the three-wave corrective phase, whose sub-waves are denoted by letters.

What R.N. Elliott set out to describe using the Elliott Wave Principle was how the market actually behaves. There are a number of specific variations on the underlying theme, which Elliott meticulously described and illustrated. He also noted the important fact that each pattern has identifiable requirements as well as tendencies. From these observations, he was able to formulate numerous rules and guidelines for proper wave identification. A thorough knowledge of such details is necessary to understand what the markets can do, and at least as important, what it does not do.

You have only just begun to learn the power and complexity of the Elliott Wave Principle. So, don't let your Elliott wave education end here. Join Elliott Wave International's free Club EWI and access the Basic Tutorial: 10 lessons on The Elliott Wave Principle and learn how to use this valuable tool in your own trading and investing.

Promising beginning

All the Elliott fans are screaming P3, P3, P3, as if the market has crashed 20% or so last week. It obviously didn't, it actually dropped 2!% last week and 5% of the highs. What a drop!

Well, to be honest, it's one of the biggest drop the bears have seen in the last six months (lol) but why are the Elliott Wavers seeing new lows in 2010/11?

It's the wave count. We've come to a point where there aren't many possible wave counts left.

One of them and the most likely one is the bearish count, where the top is in and we are heading to new lows.

The other two possibilities are on one hand an Expanding Ending Diagonal (shown as the alternative count in the chart below) and on the other hand a Triple Zigzag. Both of them are very very rare formations, so I don't think one of them will happen. Though I have to admit that the whole wave count would look nicer if it formed an Expanding Ending Diagonal.

SPX: I think a likely target for Intermediate (1) is at 900ish or a bit lower. The whole Primary wave could look like this: 1080-870-980-550-670-470. I still like the target between 450-500 for Primary [C], whereas for a Primary [3], this target would be the absolute minimum. You can read in this post I did back in August how I calculated all of my price targets ; )

Primary Count: in 1 of (1) of [C]/[3]1080

(((Alternative Count: in [iv] of C of (Y) of [B]/[2])))