Sunday, June 6, 2010

Elliott Wave Count 6 June 2010

What one single day can change! As bullish as everybody was on Thursday as bearish is everybody now...

As we know Mondays are usually bullish so we may see some bounce early Monday to 1080 or even to 1090:

It's quite hard to count the squiggles, so the wave i labeling at Friday's low is just assuming that we get the usual Monday ramp.

I'm sure many of you have already compared today with the crash in 08. I did that about two weeks ago and since it keeps correlating I'm gonna post this fractal now:

Now and two years ago the first decline (f1) was followed by a huge (bailout) rally (f2) which did not exceed the previous high. Surprisingly (NOT), the problem wasn't solved with all that money so the sell off resumed and made a new low (f3) just a few days later. A last desperate attempt (f4) of the bulls to prevent the crash failed and so we plunged hundreds of points within just a few days.

In 08 the support line connecting the lows of the previous first waves was first breached late September. The market immediately bounced but breached it again a few days later. A backtest followed and then we crashed.
I also added the trendline connecting both second waves. It looks now like a Leading Diagonal, doesn't it?

Now compare it to today...

Huh? Right! The same LD and I bet that many will be counting it as an LD if we sell off to 1020 or even a bit lower to 1000 and then get a strong rally. If we then get another, unexpected for many, sell off below 1020 and backtest it a crash is very likely.

I'm not a fan of crash predictions but being careful these days could be the right thing to do.

The bigger picture looks as follows:

Assuming that Primary [C] has started Intermediate (1) should bottom near the 09 lows. Possible target for Primary [C] at 300 ([A]=[C]) and at 500 ([A]=[C] (in %)).

Interesting week ahead!

All the best to your trading,