Sunday, October 25, 2009

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.


Thursday, October 22, 2009

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:

Wednesday, October 21, 2009

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)

Monday, October 19, 2009


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.

Thursday, October 15, 2009

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

Friday, October 9, 2009

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]

Wednesday, October 7, 2009

Great day!


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.

Tuesday, October 6, 2009

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 ; )

Monday, October 5, 2009

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)

Sunday, October 4, 2009

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! ; )


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.

Saturday, October 3, 2009

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])))

Friday, October 2, 2009

Hello P3 : )

DAX: What a nice week for the DAX! I actually expected the DAX to reach 5800 to form a really nice Ending Diagonal. It didn't happen and the last upwave ([v]) ended in a truncation. Nevermind. We've got our break below the uptrending line of the Ending Diagonal making it very likely that Primary 2 or B has ended. The very last bullish count I can see now is a possible but very very rare Expanding Ending Diagonal. But to be honest, I don't like it and won't bet anything on it... I clearly prefer the downside now.

The DAX should decline 100-200 points more on Monday/Tuesday to complete the first wave down. After that, we should see some sort of rebound, where we will get a great opportunity to load up on shorts ; )

Primary Count: in [iii] of 1 of (1) of [C]/[3]
(((Alternative Count: in [iv] of C of (Y) of [B]/[2])))

That's all for now, more tomorrow ; )

Thursday, October 1, 2009


So far, October was really nice for the bears. The SPX dropped below the important support at 1040 and closed at the low of the day around 1030. With the drop below 1039 (the high of wave [i]) we've got a waev [i]/[iv] overlap. This fact invalidates nearly every bullish count!

An ending diagonal (p. 38 in our bible) however is still possible. The fact that the boundary lines are diverging and not converging, making it a very rare expanding ending diagonal, does not argue for this possibility.

So, let's K.I.S.S. : ) I 've marked 1080 as the top of Primary B or 2 until proven wrong. The move from 1080 down to 1040 as a first wave and the run up to 1070 as a wave 2. Hence we are somewhere in the third wave which should end at 1000ish tomorrow/Monday.

Tomorrow before the open we'll get the Non-Farm Employment Change numbers. You might have heard that GS raised its expection from -200k to -250k (average forecast -180k). For known reasons GS is normally right ; ) so a much worse than expected number should drive the market lower.

Lastly, I just wanted to praise my cycles... lol... It had a cycle top at 9/25, two days after the top in the SPX. So far, it's spot on and I hope it will be it at least till the end of November when there is a cycle low. ; )

I'mma post some charts tomorrow, don't have time now ; )