Monday, August 2, 2010

S&P 500 ~ Elliott Wave Outlook on August 2010

Last Friday was not only the last trading day of the week but also the last trading day of the month. The SPX bottomed early July and then rallied for the rest of the month. The SPX was up almost 7 % in July, that's the biggest monthly gain since July 09.

Today, the new months begins and I expect the market to continue the rally that started in July. I even see the possibility of prices over 1200 by end of month.

I don't know if you remember me mentioning in April that my cycles were topping in late April and mid May and were down until July. I even posted my cycle work once in September 09:

This is the chart I posted almost one year ago. You can see that the cycle tops were late Sept 09, mid Jan 10 and mid May 10 and the bottoms late Nov 09, Feb 10 and early/mid July 10. Except of fall 09 the cycles have nailed almost every move since I've posted them.

So what's next?

The next cycle top is in late August/early September so I expect the markets to rally until then.

Note: Since I did those cycles using only 07 and 08 data I don't know how long they will be accurate. So, at the moment I'm working on a new cycle including more and newer data and I'm hoping it'll be even more accurate. I'll post it as soon as I'll have finished it.

Below you see my preferred Elliott Wave count:

I noticed that I've been using the wrong wave degree after I've changed to the 1-2-1-2 count. The wave from 1010 to 1100 was actually a first wave of minor degree.

Wave [iii] should have started at 1088 last Friday and should rally about 100 points to 1190ish over the next weeks. It's possible that the SPX will correct one more time possibly going for the 1070 gap and then start the wave [iii] rally but at the moment this count looks good and I'll prefer it as long as 1088 holds.

The 1060 area is crucial for the bulls. A break of this level would put the whole bullish count in question and the bearish alternative is possibly underway.

So, we should see a five rally from the July lows to early September (?) but what's the bigger count?

I think that the perfect 38 % retracement of the rally from 666 to 1220 ended a B wave (the typical retracement level for a b wave).

Either we get something similar to the 07 top. So, perhaps a very short wave (C) making a double top in the 1200-1250 area:

Or another biiiiiig (yep at least that big!) rally to a new all time high (!) in 2011. I don't think that a new bull market is underway though but if you print money all day (and night : )) I think it's somehow possible to get back to 1500-1600.

Wouldn't this scenario be perfect for all the perma bears by the way? Currently, I still think (too) many are expecting a crash but at 1600 I don't think there will be so many bears around.

This is the Expanding Triangle count:

Wave d should top late 2011/early 2012 at 1600 and wave e should complete the bear market around 500 late 2012 (12/21/2012 ? : )).

In case all hell breaks loose in August and 1060ish is breached you can see my bearish count right now:

In my opinion, this is the only bearish count that makes at least a little bit of sense. Labeling 1042 or 1010 as the wave 1 low looks ugly. So this could be an expanded flat with wave [c] about to finish. I still think 1220-10xx is counting much better as some corrective stuff but hey if 1060ish breaks better take an ugly count than fighting the trend and lose money.

Have a great month guys! ; )