Elliott Wave Count January 2010

Review

Back in December I posted this chart:

I wrote that I expect a high in the first week of January 2010. The actual high occured in the second trading minute of the second week of January 2010 - I hope you forgive me : )

From there the Nasdaq plunged almost 8% and closed at 2147 giving back the entire gain of December.

Preview

Early February should be quite bullish just like early January since I expect Minor wave 2 to unfold. But then somewhen in mid February Minor wave 3 should start and lead to a big plunge probably down to 1000 in the SPX.

The MA's in the chart are the MA 29 and 76. While the MA 29 often stopped short term rallies/sell offs the MA 76 concluded medium term rallies/sell offs after the MA 29 was broken. In Primary [B]/[2] both Intermediate (X) waves ended at the MA 76 (green arrows).

It looks now as the market broke below this MA and I'd love to see a retest of it from below what may finish Minor wave 2 (like what we saw in June 08 after the break of the MA 76).

USD ~ Elliott Wave Count Week 4 2010

I don't have anything to add to last weekend's post.

I think that wave 3 up started in mid January and we haven't even seen half of this wave. The whole impulse (1-2-3-4-5) should end somewhen in March coinciding with the low of Intermediate wave (1) in the indices.

This chart still looks very nice ; ):

Nasdaq ~ Elliott Wave Count Week 4 2010

Review

The Nasdaq dropped further (more than 2,5%) this week as expected in last weekend's Nasdaq post. The only thing I've changed is the wave degree. I calculated where this Primary wave would end when we were only in Minute [i]. The result was below 0... : ) So, I've changed it to Minor 1 ; )

Preview

No reason to change the count. There should be a new low early next week before wave 2 should start and retrace at least 38% of Minor wave 1.

If you haven't read my SPX weekly update yet click here.

S&P 500 ~ Elliott Wave Count Week 4 2010

Review Week 4

After losing 4% last week the SPX lost another 2% this week. From the top at 1150 it's already dropped 80 points and all that in just eight trading days! If it keeps this pace we will see new lows by the end of March. LOL.

Last weekend I expected the low of wave 1 somewhen early in the week and then a rally for the rest of the week up to 1120. But for some reason the dip buyers were MIA and hence the SPX went lower. At the end of the week it was clear that we saw for the SPX what I expected to see only for the Nasdaq.

Preview Week 5

The counts for the Nasdaq and the SPX are now similar and they both need one more low to form a nice impulse. Then, I expect a bounce in a wave 2. I hope it to reach at least 1100, 1120 would be even better to rebuy the shorts I sold this week.

I'm gonna post a weekly update for the Nasdaq, the Dollar and an outlook for Feburary later ; )

Elliott Wave Count 28 January 2010

Dip buyers MIA!

Well, it looks like I'll get my birthday present for tomorrow : ) All the markets made new lows today.

Have a look at my alternative count I posted for the Nasdaq in my weekend update:
http://www.wavaholic.com/2010/01/nasdaq-elliott-wave-update-week-3-2010.html

I wasn't that bearish for this week that's why I didn't prefer this count. But now this one looks perfect for the Nasdaq and the SPX as well. These up and down moves we were seeing over the last few days looked like the wave 4 wave 5 action I explained in that post.
Wave 1 may have ended today and wave 2 started. And btw if not it's not that bad since I won't go long for this upwave anyway. I'm just waiting for a nice short opportunity ; )

Elliott Wave Count 27 January 2010

Kenny posted this in the comment section yesterday:

"I like the SPX count that favours a 4th wave finish, which was an a-b-c flat and that it has started the commencement of a 5th wave which could possibly pull up wave 1 down between 1080-1085."

And this was the perfect description for today's trading day!

I was wrong yesterday expecting wave c of 2 up to 1105+. The SPX made a new low today and should have completed wave 1 now. The end of day rally should be the beginning of wave 2 which I hope to reach at least 1115-20 to give a nice short opportunity.

After wave 2 will have finished wave 3 should start and drop down into the low 1000's.

Elliott Wave Count 26 January 2010

The first wave possibly finished in the morning at 1090. The only concern I have is that the sell off into the close almost made a new low. But so far, the rally today can be counted as wave a of 2 and the drop as wave b of 2. Thus, wave c up to 1105+ should follow tomorrow.

For charts look at my SPX chart I posted on Saturday: http://www.wavaholic.com/2010/01/s-500-elliott-wave-update-week-3-2010.html

It has been quite accurate so far ; )

Dow Jones ~ Fractals

Nothing special today - perhaps a wave 4 and the beginning of a fifth wave right before the close.

The best time to short is after 5 waves down (i. e. wave 1) and 3 up (i. e. wave 2). The important question now is how far wave 2 will retrace.



1 - The all time high. The candle stick pattern looks very similar to today: A doji was followed by a big red candle which closed at the low of the week. The next week was up and retraced more than 62% of the first wave.

2 - The top of Intermediate wave (2). Yesterday, I recieved an email with the following chart:

In both cases the new downtrend started with some strong down days. The following second subwave of the first downwave of Intermediate (3) was very short, less than a 50% retracement.

3 - Today. Again a big red candle which closed at the low of the week. There are two fractals in the recent past which call either for a big or a short wave 2.

So it may be quite difficult to short the top of wave 2 since we may not get the usual 50-62 % retracement.

USD - Elliott Wave Count Week 3 2010

It's been a long time since I've talked about the Dollar. More precisely it was early December when I showed you this chart:



Seven weeks later the chart looks like this:

The Dollar perfectly obeyed me : ) and should be ready for a big rally in the coming weeks.

Nasdaq ~ Elliott Wave Update Week 3 2010

Nasdaq at 2100, SPX at 1040 and the Dow below 10000 by the end of next week?

Possible and it would be a nice birthday present for me but I think that my SPX count has a higher probability.

The only reason why I show you this alternative count is that the SPX count doesn't work for the Nasdaq. If I labeled it in the same way there would be an overlap between waves (i) and (iv) which is not allowed.

The only possibility to count these waves correctly is to label them as a series of waves 1's and 2's:

The drop on Friday can be labeled as the center of wave [i] (3 of 3) since there is no overlap. Thus, we should see some wave 4-5 action next week.

There are three possible places to label the top of wave [v] but I think that the best place is the top (lol...), where I had it in the first place anyway. (The other two places would be where I had it last weekend and the wave (ii) high (matching the SPX count))

So, you know now that we'll either go up or down next week... : ) I prefer the upside but I'm not going to buy any calls I'll rather add some shorts if we get back up to 1120 in the SPX.

S&P 500 ~ Elliott Wave Update Week 3 2010

Wow! The SPX lost about 4% this week. That truly is a nice beginning for a new downtrend. ; )

On Tuesday the SPX made a new high at 1150 invalidating my favourite count I posted last weekend. But it also failed to break above 1150 for the third time. On Wednesday the market sold off back to 1130 again and one day later the breach of 1130 confirmed the beginning of a new downtrend as written on Tuesday. Till the end of the week the SPX lost another 40 points and closed near 1090.

There are two short term counts: The first one, shown in the chart, calls for a green next week. On Monday there may be another new low down to 1080ish to complete wave [i], but then wave [ii] should start and retrace about 50 to 62% of wave [i] - the 1110 to 1120 area should be a good target.

In the second one (I'm gonna show it to you in my Nasdaq update) wave (iii) of [i] hasn't even finished. So there should be a lot more downside next week before wave [ii] will unfold.

But I think that the first option is the more likely one.

Gonna post some Dow, Nasdaq and Dollar charts later.

Have a nice weekend! ; )

Elliott Wave Update 21 January 2010

This is really exciting! The SPX managed to break below 1130 leaving the channel to the downside. The next important support is around 1090. I suspect that the first wave will end there or a little bit higher.

Yesterday's drop can be counted as wave 1 and today's as wave 3. Wave 3 is a bit short but we're at a support so the third wave may have ended. Tomorrow after some retracement in a wave 4, wave 5 should follow down to 1100 or so which would complete the first wave. The SPX mustn't rally above today's high for this count to stay valid.

Elliott Wave Update 20 January 2010

Yesterday we learned that they don't need a Monday for a big rally.

Today we learned that you don't have to be on a ship to get seasick - just watch the stock market!

What took weeks in 2009 (endless bouncing between 1090 and 1120) takes in 2010 only days.


With today's drop I have the following counts:

- The Nasdaq didn't make a new high yesterday, so, my preferred count I posted on Saturday is still valid and still my preferred count.

- The SPX however made a new high yesterday hence I changed to my alternarive count. Should the market fall below 1130 the top should be in (<< I did it again!!! : )).

Elliott Wave Update 19 January 2010

When I call a possible top next time please remind me not to do that again lol : )

With the new high today I changed to my alternative count... I know I gave it a very low probability but today I've learned that they don't need a Monday for a big rally.

I don't see a bullish count for the Dow (beside a uber bullish one (the ED could be a leading diagonal...)) so just take the alternative count for the Nasdaq and SPX.

Targets are still 2340 and 1160. A drop below 1130 should confirm that the fifth wave is finished.

S&P 500 ~ Elliott Wave Update Week 2 2010

The SPX hit 1150 this week making a new rally high less than 1% below my target of 1158. The wave structure also looks completed, thus I think the top is also in for the SPX.

I added the alternative count also for the SPX but for the reason I explained in yesterday's Nasdaq post I don't think it will happen.

The best thing about next week is by the way that the US markets will be closed on Monday, so, we won't see the usual gap and ramp up on Monday : ) May be that's what the bears have been waiting for lol.

Nasdaq ~ Elliott Wave Update Week 2 2010

I think that the Nasdaq topped this week.

Looking at the chart you can see a perfect impulse: a line connecting the ends of waves [ii] and [iv] is parallel to the line connecting the ends of waves [i] and [iii]; and wave [v] ended at the middle line. The same structure we got for the subwaves of wave [iii] by the way.

Even though this looks perfect I added an alternative count which allows for one more new high. But since I don't see an alternative bullish count for the Dow I give it a very very low probability.

If you compared the actual count with last weekend's count you might have spotted that I've slightly changed it. The reason why I've changed it is to align the Nasdaq count with the Dow and the SPX which both made a new high on Thursday. So, I think the rally ended with a truncation for the Nasdaq.

Dow Jones ~ Elliott Wave Update Week 2 2010

The Dow made a new high on Thursday completing a possible ending diagonal. On Friday it dropped below the uptrend line connecting the lows of waves B, [ii] and [iv] raising the hope of all bears (if there are any left!?) that the top is in.

Early next week I expect the Dow to retest the broken trendline from below to complete wave (ii). Then, wave (iii) should start which is normally about 1,62 times as long as wave (i).

While I don't see any likely bullish count for the Dow I do see one for the SPX and the Nasdaq. This count would allow for one more push higher.

I'm gonna show it to you later ; )

Nasdaq ~ Elliott Wave Update 15 January 2010

So far that looks pretty nice. The Nasdaq made 5 waves down into midday, then tried to rally and closed -1,24 % for the day. On Tuesday we should see some more upside possibly reaching the 50 or even the 62 % retracement level of today's move down. Then, the third wave down should start.

Charts will follow tomorrow ; )

Nasdaq ~ Elliott Wave Update 13 January 2010

The Nasdaq erased all of yesterday's loss despite Google being very weak today. If the correction really has started then we should drop tomorrow.

In the meantime the Dow made a new high and is completing an ending diagonal. So, it's entirely possible that the Dow topped today or tomorrow and the Nasdaq peaked a few days ago.

Nasdaq ~ Elliott Wave Update 12 January 2010

Weeeee : D the Nasdaq dropped below 2285 and closed at 2282 (-1.3%). As per my count at least an intermediate top should be in.

Let's see if it's just another fake or if it's the beginning of a new downtrend ; )

Nasdaq ~ Elliott Wave Update 11 January 2010

The markets opened higher (well... As always on Monday...) making another new rally high. The rest of the day was kinda boring since the indices moved mostly sideways. The Dow and the SPX closed higher while the Nasdaq was weaker and closed lower.

I didn't find any time to write the weekly update for the SPX so sorry about that. But since the Nasdaq count looks much clearer at the moment anyway I prefer to follow the Nasdaq.


The magic numbers stays at 2285.23, the wave [iv] low. As soon as the market falls below that level I think the correction or even a new downtrend has started.

Nasdaq ~ Elliott Wave Update Week 1 2010

The bulls had a great start into 2010 - the Nasdaq soared more than 2% this week.

I had to adjust the count a little bit (I replaced minor wave B), but all in all I'm very happy with the first trading week in 2010.

As expected in last weekend's post the impulse started on December 12th was finished when the Nasdaq hit the middle trendline. However it turned out not to be the top of Intermediate wave (Z) but only the top of wave [iii]. So, another correction followed (wave [iv]) and on Thursday wave [v] started. Wave [v] can end anytime in the next few days and will be very likely over when the market drops below the low of wave [iv] (2285.23).

So, I'll be watching for a drop below 2285.23 to enter short positions.

(Weekly update for the SPX will follow tomorrow ; ))

S&P 500 ~ Elliott Wave Update 8 January 2010

The markets opened lower after the non-farm employment change was worse than expected. Shortly after the open they began to rally for the rest of the day and closed near the rally highs.

The Dow closed at 10618, up 0,11%, the SPX at 1145 (+ 0,29%) and the Nasdaq closed the week at 2317 (+ 0,74%).

Since in an ending diagonal the subwaves subdivide into zigzags I was expecting a three wave move up today to finish the last subwave. After the morning rally we got some kind of a triangle and then the spike up to 1142.52 around 13:30. So it was possible that the three wave move was completed.

The market however didn't drop below important trendlines and so we got another spike up late in the day to make another new rally high at 1145.39.

With this spike we can clearly see now a nice [A]-[B]-[C] to the upside with [A]=[C].

My only concern to call today a or the top is that the next week begins with a Monday (.... : ))

9 out of the last 10 Mondays were up days, and most of them opened with a gap up. So, the odds are clearly against a down day or even the beginning of a new downtrend.

Have a nice weekend! ; )

1142.52

Although the futures were mostly higher overnight the markets opened lower after the non-farm employment change was worse than expected.

So, I didn't get the gap up I hoped for but therefore the market started to rally right after the open as expected. A bit more than an hour ago the SPX hit 1142.52 making a new rally high. Right now we're about 2 points below it and it's very well possible that this was the top.

But for now it's just an assumption and I wouldn't bet any money on it ; ) A first sign that the market has peaked would be a drop below today's low.

Edit 15:20: I actually thought this day would look similar as the "day 5's" of waves [i] and [iii] when we got a sell off into the close. So, let's see what we'll get in the next forty minutes... ; )

S&P 500 ~ Elliott Wave Update 7 January 2010

The markets opened lower again and then dropped further in the first trading hour. Then, they stabilized and rallied for the rest of the day.

The Dow and the SPX made new uptrend highs and closed up (+0,31% and +0,4%) while the Nasdaq lagged a bit and closed slightly lower (-0,05%).

With the SPX being stronger than the Nasdaq in the last two days we got the nice situation that both indices are 1,5% below my target of 1158 in the SPX and 2340 in the Nasdaq. But actually I expected the market to peak in the first week of January. Since tomorrow is already Friday I suspect that the markets won't reach my targets. But tomorrow the non-farm employment change and the unemployment rate will be released so it could be quite volatile before and right after the open.

As expected the slow rise continued. Tomorrow will be day 5 so it should be the last day before the market tops (see yesterday's post). Day 5 in waves [i] and [iii] began with a gap up and a rally after the open. Then the market peaked before midday and began to drop in the afternoon. So, we might see something similar tomorrow.

S&P 500 ~ Elliott Wave Update 6 January 2010

The markets opened slightly lower today and moved randomly up and down the whole day.

The Dow and the SPX closed higher (+0,02% and +0,05%) while the Nasdaq closed lower at 2301 (-0,33%).

Waves i and iii began both with a big rally and then went slightly upwards for about five days until they topped. So far, wave v behaved similar: big gap up on Monday followed by a slow but steady rise yesterday and today. Expecting to take it also five days for wave v the market should peak on Friday (or Monday morning).

Tomorrow I'm gonna ski so don't expect me to be back before 20:00 (2pm US time). ; )

Nasdaq ~ Elliott Wave Update 5 January 2010

After yesterday's big rally the markets opened flat today. At 10:00 after pending home sales were reported much lower than expected, the market started to rally for some reason. By 11:00 when the SPX and the Nasdaq made a new uptrend high they must have noticed that a lower than expected number is not that good for the economy... Hence, the markets tanked until 90 minutes before the close. Then, the markets bottomed and rallied into the close.

The Dow closed slightly lower at 10572 (-0,11%), the SPX made a new uptrend high in the end of day rally at 1137 and closed there (+0,31%) and the Nasdaq closed flat (+0,01%) at 2309.

It's quite difficult to make a proper short term count. A possibility is that wave (i) and (ii) of wave [v] are completed and that wave (iii) began just before today's close.

somewhere in wave [v] ...

At the moment all the markets are slightly red consolidating after yesterday's rally.

But I don't think wave [v] has topped yet, I expect further upside for the rest of the week.

The fractal I've just found supports this view (I just copied the blue area, so I don't expect that the market will behave exactly like that):

Nasdaq ~ Elliott Wave Update 4 January 2010

The Nasdaq opened near the December highs and continued to rally. Around lunch time it made a new rally high at 2311 and then went sideways for the rest of the day.

Including today 9 of the last 10 Mondays were up days (and most of them gapped up). So it was actually the perfect setup for the start of wave [v].

For the next days I expect the market to continue to rally towards 2340 possibly along the middle trendline and then peak on Thursday or Friday.

A first sign that the market has topped will be a drop below the wave [iv] low (2269).

And another gap up ; )

Today's huuuge gap up started wave [v] with a price target of 2340ish.

Right now, the Nasdaq is trading at 2307, about 30 points or 1,5% below my target.

So, the SPX might not reach my target of 1160ish; it might just get to 1145. That's about 1,5% from here and wave v would equal wave i.

2010 ~ Bear Market - Chapter 2

2008 was ruled by the bears.

The bulls dominated 2009.

2010 - it's time for the bears to strike back!

Within some days I expect this bear market rally to finish. From there the market should start a new severe decline over the next one or two years and fall well below its March 09 lows. I still like the 450-500 points area in the SPX as a bottom for the entire bear market.


The clue, whether the bear market rally will have topped or not, will give us the next wave pattern to the downside:

Let's say we'll get a move down towards 950-1000. If this move down unfolds as any corrective pattern (i.e. only three waves) we can expect another rally up to 1200 or 1300 for the rest of the year.

But, and that's what I'm expecting, if we get five waves down, we'll have to be very very careful because the next crash might be just around the corner.


While I'm clearly favouring the downside I won't dismiss another big rally in 2010; as I've said, after the first wave down I should be able to tell whether a big bear is coming or if it's just another bear trap.

Rules and Guidelines ready

I've just posted Elliott Wave ~ Rules and Guidelines. You can find the link also in the sidebar on the right.

I'm not a rule fanatic or so : D. So, I didn't write down all the 300 rules and 2000 guidelines . I took the (in my opinion) most useful rules and guidelines for each wave pattern and added a chart to each of them to make it a bit clearer.

It's thought for beginners who'd like to learn the Elliott Wave Theory and also for experts who just need to look up a certain rule or so. ; )

(Feel free to link it on your website/blog whatever)

A stock market outlook for 2010 will follow tomorrow.

Elliott Wave ~ Rules and Guidelines

Motive Waves

Impulse (5-3-5-3-5)

Rules

- An impulsive wave always subdivides into five waves (1-2-3-4-5).

- Wave 1 usually subdivides into an impulse or seldom into a leading diagonal.
- Wave 3 subidivides into an impulse.
- Wave 3 always moves beyond the end of wave 1.
- Wave 3 is never the shortest wave.
- Wave 5 subidivides into an impulse or an ending diagonal.
- Wave 2 subidivides into a zigzag, flat or combination.
- Wave 2 never moves beyond the start of wave 1.
- Wave 4 subidivides into a zigzag, flat, triangle or combination.
- Wave 4 never moves into the territory of wave 1.


Guidelines

- Wave 1, 3 or 5 is usually extended, while wave 1 is the least commonly extended wave.
- If wave 3 is extended, it’s common for subwave 3 of 3 to extend as well (the same applies for wave 1 and 5).
- Subwave 3 of 3 almost always has the steepest slope within the parent impulse.
- Wave 5 often ends when hitting a line drawn from the end of wave 1 or 3 that is parallel to a line drawn between the ends of waves 2 and 4.
- Wave 5 normally ends beyond the end of wave 3, if not it’s called a truncation.
- If wave 2 was a sharp correction, wave 4 will almost always be a sideways correction and vice versa (Alternation).
- Wave 2 is usually a zigzag or zigzag combination.
- Wave 4 is ususally a flat, triangle or combination thereof.
- Wave 4 usually ends within the price territory of the fourth wave of wave 3.

Diagonal (3-3-3-3-3 or 5-3-5-3-5)

Rules

- A diagonal always subdivides into five waves (1-2-3-4-5).
- Wave 4 never moves beyond the end of wave 2.
- Wave 4 always moves into the price territory of wave 1.
- In the contracting form, wave 5 is shorter than wave 3, wave 3 than wave 1 and wave 4 than wave 2.
- A line drawn between the ends of waves 2 and 4 converges towards (in the contracting form) or diverges from (in the expanding form) a line drawn between the ends of waves 1 and 3.

Guidelines

- Waves 2 and 4 usually retrace 62 to 80 % of the previous wave.

Ending Diagonal (3-3-3-3-3)

Rules

- An ending diagonal is always a wave 5 of an impulse or a wave C of a zigzag or flat.
- All waves subdivide into zigzags.

Guidelines

- Wave 5 usually end beyond the end of wave 3 (if not it’s called truncation).

Leading Diagonal (3-3-3-3-3 or 5-3-5-3-5)

Rules

- A leading diagonal is always a wave 1 of an impulse or a wave A of a zigzag.
- Waves 2 and 4 subdivide into zigzags.
- Wave 5 ends beyond the end of wave 3.

Guidelines

- Waves 1, 3 and 5 are usually zigzags but can also be impulses.

Corrective Waves

Zigzag (5-3-5)

Rules

- A zigzag comprises three waves (A-B-C).
- Wave A is an impulse or leading diagonal.
- Wave B can be any corrective pattern.
- Wave B never goes beyond the start of Wave A.
- Wave C is an impulse or ending diagonal.

Guidelines

- Waves A and C are usually impulses.
- Wave C often equals wave A and therefore ends almost always beyond the end of Wave A.
- Wave B usually retraces between 38 and 50 % of wave A
- A line drawn between the ends of waves A and C is often parallel to a line drawn between the starts of wave A and C.

Flat (3-3-5)

Rules

- A flat comprises three waves (A-B-C).
- Wave B retraces at least 70 % of wave A.
- Wave C is an impulse or ending diagonal.

Guidelines

- Wave B usually retraces between 100 and 138 % of wave A.
- Wave C is usually 100 to 162 % as long as wave A.
- Wave C usually ends beyond the end of wave A.

Triangle (3-3-3-3-3)

Rules

- A triangle subdivides into five waves (A-B-C-D-E), whereof at least four of them are zigzags.

Contracting Triangle

Rules

- Waves C, D and E never move beyond the end of the preceding same-directional wave.
- A line drawn between the ends of waves B and D converges with a line drawn between the ends of waves A and C.

Guidelines

- When wave B ends beyond the start of wave A it’s called a running triangle (about 40 % of all triangles).

Barrier Triangle

Rules

- Waves B and D end at the same level.

Expanding Triangle

Rules

- Waves C, D and E move beyond the end of the previous same-directional wave.
- A line connecting the ends of waves B and D diverges from a line drawn between the ends of waves A and C.

Guidelines

- Waves B, C and D usually retrace between 100 and 125 % of the previous wave.

Combinations

Rules

- Combinations subdivide into two or three corrective patterns (labeled W, Y and Z) that are separated by one or two corrective patterns in the opposite direction (labeled X).

Guidelines

- When a zigzag or flat seems to be too small to be the entire correction, it’s likely to get a combination.

Nasdaq ~ Elliott Wave Update Week 53 2009

I wish you all the best in 2010!!

I don't think the market has already topped (it's possible though), mainly because there are three different fibonacci relationships which suggest a top around 2340.

- (Y) = 1,38*(Z) at 2343

- (W) = (X1) to (Z) at 2341 (the distance between the low of (X1) and the high of (Z))

- A = C at 2337

Also the Elliott Wave count allows for another high. As you can see I think that the end of year sell off finished wave [iv] and that wave [v] will unfold next week.

Long term chart (one week old):