Elliott Wave Trade Analysis

Market Update Feb-04-2010 (Before the Bell)

2010-02-04T09:14:00.000-05:00

As we expected since Monday (Feb-01-2010), a minor wave 2 was forming. Wave 2 should have a minimum of an A-B-C structure, where Wave “A” and “C” should be bullish and wave “B” to be bearish. Yesterday we had a down day. The zigzag nature of yesterday’s wave looks like wave “B” of wave 2. This should typically retrace 50% of wave “A”. As of yesterday’s closing, the wave “B” retracement was less than 38.2%. So I was expecting today to be another bearish day to reach the 50% retracement around 1089.

Today morning e-Mini S&P 500 is sharply down before the market opens. This has already touched the 50% retracement. If this does not bounce back as the market open’s, we have to assume that wave “3” has started.

Market Update Feb-01-2010 (Before the Bell)

2010-02-01T09:32:00.000-05:00

As of my last post on Jan-07-2010, I was waiting for the price to break below the support line for the bearish trend to start. On Jan-20-2010, it broke the support line. Since then we saw a sharp decline till last Friday. So what’s next?

In the following 1 year chart, the RSI has reached the oversold territory. In a bearish trend it could be in this territory for a long time, but this is the first wave down, so there is a good potential that it would bounce back this week to form wave 2.

In the following 20 days chart of S&P 500 (SPX), we could identify a potential 5 waves down. MACD is showing some divergence. RSI is in the oversold territory. As of 9:30 A.M., e-Mini is up by 6.5 points.

Market Update Jan-07-2010 (Before the Bell)

2010-01-07T08:46:00.001-05:00

Yesterday, S&P 500 (SPX) has reached as high as 1,139.19. This is very close to my target of 1,140. Because it took a week more than what I expected this to happen, my escalating upper trend line as per my Jan-4th chart is around 1,155. As it has not touched this, in the following chart, I am providing another possibility. Here the wave A of the ending triangle is on Oct-20th instead of Sep-23rd. With this wave count, we have a throw-over as of yesterday.

The most interesting fact is that on the following weekly chart in log scale, S&P500 is touching the upper trend channel line of decline we had since 2007.

To make it more interesting the Dow Johns Industrial Average (DJX) is also touching the upper trend channel line of decline we had since 2007.

E-Mini S&P 500 (/ES) reached as high as 1,135 yesterday at around 2:30 P.M. Since then it declined as low as 1,1,28.50 at around 4:50 A.M. In this decline, we could identify a possible 5 waves. This indicates a potential decline is on its way.

In the S&P 500 (SPX), the lower trend support line and the 50% retracement is at around 1,121. If this is a major decline, it should not have any issue in breaking thru this support level very soon. So I would wait for this to happen to call it start of a major bear trend.

Market Update Jan-04-2009 (Before the Bell)

2010-01-03T21:21:00.001-05:00

The last trading day of 2009, was bearish. S&P 500 (SPX) is now touching our lower trend line. If it breaks thru this, we could consider a major trend reversal. Last week it could not touch our upper trend line. As we are expecting this to be forming an ending triangle, I was looking for a bullish throw-over or touch the upper trend line (black line) with high volume or both. Neither has happened, so we better be patient and look for more confirmation.

Market Update Dec-30-2009 (Before the Bell)

2009-12-30T08:24:00.000-05:00

In my previous analysis on S&P 500, I indicated a possible target of 1,140. Monday (Dec-28-2009) it reached as high as 1,130.38. Yesterday (Dec-29-2009) it touched that high, but could not break thru it. Since then we are seeing a downtrend. So far it has not broken the support line which is around 1,120. But the following 2-Mini S&P 500 Futures as of 8:15 A.M. (EST), indicates it is continuing the bearish trend it started yesterday. The support like for e-Mini is around 1,110. I have provided a potential A-B-C-D-E labelling for this ending triangle. In many cases, an ending triangle could be labelled prematurely. So it is better to wait till it breaks the support line before we call this bullish trend since March-2009 has ended.

S&P 500 Index (SPX) – Are we there yet?

2009-12-26T09:49:00.000-05:00

Following is the chart of S&P500 since 2007 in log scale. A five wave bearish trend that started in Oct-2007 ended in Mar-2009. This could be either wave 1 of wave A of a 5-3-5 structure or it could be wave A of the 5-3-5 structure. The highly overlapping nature of the bullish trend we are seeing since Mar-2009 makes me think that this could be wave B instead of wave 2. I have labelled this as wave I or “A” and wave 2 or “B”.

The complex nature of this bullish trend is hard to label. I have given a potential labelling as W-X-Y. That could be incorrect. As of last Thursday (Dec-24-2009), we have closed above the 50% retracement at 1,121. The closing price is at 1,126. As per the chart we have the following resistance in this area.

1. The 50% retracement at 1,121. For wave B this is an ideal target. If it is wave 2, ideal target would be 61.8% at 1,228.

2. In log scale if I extend the base channel (green color channel line) of the 2007-2008 declines, our bullish trend since Mar-2009 would meet this at around 1,140. This is only 14 points away from the closing price so far.

3. In the following 6 months chart, we have a potential to identify an ending triangle. The final wave E of this ending triangle would also be around 1,140.

Suppose if this breaks the upper trend line (black color) of this ending triangle at 1,140, I would expect the bullish trend to continue to meet the upper resistance line (red color) of the bullish trend we are seeing since Mar-2009. The potential for this to reach the 61.8% retracement should be considered.

On the other hand if it breaks the lower trend line of this ending triangle, which is also the support line (red color) of the bullish trend since Mar-2009, we could expect a major trend reversal for S&P 500. This support is around 1,110. So we are not too far.

In the following chart, compared to the 2007-2008 decline we are between 61.8% and 76.8% Fibonacci retracement. This is acceptable time to end the retracement, but could potentially go much higher.

The only major decline we saw in this bullish trend is in June-2009. When I do a Fibonacci price extension the bullish gain between Mar-June would be the same after July-2009 at 1,167. This is the 100% price extension. This could potentially be another resistance. The 50% and 38.2% of this extension did provide some resistance and support along the bullish trend we saw since July-2009.

NASDAQ (NDX) – Where is it going?

2009-12-25T10:29:00.001-05:00

In my previous post I indicated that NASDAQ could be making an ascending triangle if it breaks the upper trend channel that I marked. So it did. Now where is this going? Is it near the end?

Following is the chart of NASDAQ since Feb-1998 in log scale. NASDAQ had its biggest drop in Mar-2000 to Oct-2002. It reached as low as 795 points. In the 2008 drop it reached the low point at 1,019. This is not a new low. In the 2000 – 2002 drop we could label 5 waves down. This structure could be wave 1 of wave A or wave A itself. If this is wave 1 of wave A, we should have expected a sharp wave 2 retracement that should have retraced at least 50%. In the 2002 – 2008 bullish trends we saw less than 38.2% retracement also it has taken a lot of time to build. Therefore I think 2002 low was wave [A]. Since then we are in wave [B]. Oct-2007 high must be wave (A) of wave [B]. If you look at the bearish trend of NDX since Oct-2007, unlike S&P 500 (SPX) and DOW Johns Industrial Average (DJX) we could see only 3 waves down. SPX and DJX have 5 waves down. So Nov-2008 low of NDX could be wave (B) of wave [B]. If so, since Nov-2008, we are in wave C of wave (B).

This would explain why the stocks in NASDAQ are finding new highs compared to where they were in 2008. So trying to label wave 2 in NASDAQ as most Elliott Wave analysts does these days could be totally wrong. Any down trend in NASDAQ would be short lived. Major down trend in NASDAQ may not be coming any time soon. Also the RSI in the above monthly chart has not reached the overbought territory.

So where is it going? I think it is reaching towards the upper trend channel above 1,950 in the following 2 year daily chart.

Market Update Dec-17-2009 (Before the Bell)

2009-12-17T09:24:00.002-05:00

Today could be another possible day for the breakdown. In the following e-mini NASDAQ 100 index futures chart, as of 9:10 A.M. it is touching my lower trend line. I like to see this break bellow it. I have labelled it as an ending triangle. If so, it should not have any more correctional waves to go.

Suppose if this bounce back and breaks the upper trend channel around 1,820, we will consider this to formation to be an ascending triangle. As I indicated in my previous posting, as of Dec-15th, time wise we have the same number of trading days in this bull market compared to the bear market we had in 2007-2008 period. That’s why I am expecting some major trend setting to happen close to Dec-15th.

In the following 5 minute chart, we can see that this trend line is not giving up that easily.

Market Update Dec-15-2009 (Before the Bell)

2009-12-15T09:11:00.000-05:00

Since Dec-09-2009 9:00 A.M. e-Mini S&P 500 (/ES) was forming a bullish trend. Yesterday Bollinger band on this had contracted. Today morning it is trading bearish. I was expecting this is to spike up in the bullish direction and touch my upper trend channel at around 1,125 and come down. May what it is forming is just a small dent and it may bounce back. Suppose if this breaks the lower trend channel around 1,090, we could expect a bearish trend for at least in short term.

There is another importance to today’s date. Bearish trend on NASDAQ started on Oct-31-2007 and ended on Nov-20-2008. When I draw a Fibonacci time ratio on number of trading days from Nov-20-2008, as of today (Dec-15-2009) it has made a 100% retracement. So this could be the day for NASDAQ to continue the bearish trend it started on Oct-31-2007.

Market Update Dec-09-2009 (Before the Bell)

2009-12-09T09:06:00.000-05:00

Yesterday e-Mini S&P 500 came close to the lower trend line that I marked. It did not touch or break thru this. So we don’t have the confirmation we were looking for. Therefore the bullish trend could continue. Suppose if e-Mini breaks the lower trend line, we can expect a down trend to start. Otherwise we should expect the bullish trend to continue.

Market Update Dec-08-2009 (Before the Bell)

2009-12-08T08:33:00.000-05:00

Last few days I did not post any updates as the formation of the structure was not very clear. On a correctional wave that was going bullish for several months without any major pullback, it was difficult to put any wave count on every single turn. But today we have a possibility to label an ending triangle.

In the following chart, I have labelled my A-B-C-D-E wave count for an ending triangle. Today morning since 5:08 A.M. e-Mini S&P 500 has lost over 12 points as of 8:30 A.M. To confirm this labelling, this has to break the lower trend channel at around 1,080 – 1085 range.

Market Update Dec-03-2009 (Before the Bell)

2009-12-03T09:25:00.000-05:00

Last two days the market is moving sideways close to the upper trend channel. Yesterday SPX touched another 52 weeks high at 1115.58. Is this the top? I am sceptical. From the top we could argue that we are seeing 5 waves down. I have marked them in blue. But the wave 2 is not as I would expect. It looks like a small consolidation. I have marked an alternate 3 waves down, which I have marked it in yellow. I think that is more accurate.

We have the 50 % retracement of yesterday morning drop at 1,110.46. Yesterday’s close was just below this. The overnight e-Mini S&P 500 (/ES) was bullish. It reached as high as 1,115.30. This was close to yesterday’s high of 1,115.50. The nature of the bullish trend is more of a correctional wave structure. We could call it double top. But the downtrend from 1115.30 doesn’t look motive either.

Market Update Dec-01-2009 (Before the Bell)

2009-12-01T09:18:00.000-05:00

Overnight futures market was going high on weakness in U.S. dollar. As of 9:00 A.M. (EST), dollar futures (/DX) have lost another 0.39 points (0.52%) and trading at $74.54. It is close to reach the previous low of $74.21 of Nov-25-2009. Is it trying to reach a new low or testing our patience?

With dollar’s weakness, gold futures (/GC) went high as $1,200.50. From that peak it did come down to $1,191.50. But the formation of that was more of a consolidation or a correctional move. So, we expect the Gold to go even higher or touch the $1,200 again.

e-Mini S&P 500 has reached $1,105. We were expecting this bullish trend for the last 2 days to be wave 2. For this count to be valid, it has to stay below $1,111.55. So we are very close for this count to be invalid.

Market Update Nov-30-2009 (Before the Bell)

2009-11-30T05:56:00.001-05:00

Last Friday (Nov-26th) U.S. market started with over 200 points down in DOW. But throughout the half day session, market was going up. We indicated this could be a minute level wave 2. This assumption is valid only if the gap it created in the market doesn’t get filled.

If we are facing the start of the new primary wave 3 bearish trend, we expect today the market to close below the Friday’s low. Yesterday (Nov-29th), when the futures market opened, it was bullish. As of 5:40 A.M., Hang Seng is up by 687 points (3.25%). NIKKEI is up by 264 points (2.91%). European markets are slightly down. Since 11:00 P.M. yesterday (Nov-29th), e-Mini S&P 500 (/ES) is in a slightly down trend. But it does not look like a motive wave 3 down trend so far.

Over all we have a mix signal. We have to watch out rest of the day to see if indeed it was the start of a new bearish trend or not.

One interesting fact is that as of 6:00 A.M., U.S. Dollar Index Futures, e-Mini S&P 500 and GOLD are all slightly down. But still for every bullish bar in dollar we see a bearish bar in e-Mini and GOLD. So it looks like e-Mini and GOLD is still having the inverse relationship with U.S. dollar, but overall we see a deviation in this trend as we noticed on last Wednesday (Nov-25th).

Market Update Nov-27-2009 7:00A.M.

2009-11-27T07:22:00.001-05:00

By now most Elliott Wave traders would have identified this drop as primary wave 3 (P3). E-Mini S&P 500 Futures (/ES) came down from 1,111 to 1067. It has bounced back to about 1,079. This could be a minute level wave 2.

Gold Futures came down from 1196.80 to 1135.80. It has come out of the bullish channel it was forming since Oct-29th-2009.

Today is a short market day in U.S. You could take it as a day to short your positions or just short session of trading day.

Market Update Nov-26-2009 4:30 A.M.

2009-11-26T04:28:00.000-05:00

Today U.S. markets are closed for Thanks Giving. In the futures market E-mini S&P 500 (/ES) is making a nose dive.

Gold Futures are also on a retrieve.

U.S. dollar is going up.

Gold (GLD) - At the top?

2009-11-25T13:52:00.001-05:00

Gold looks like at the top in the price chart. Analysing the SPDR Gold Trust GS (GLD), it has gone above the channel it was forming since Jan-20-2009.

In the following 60 days chart, it has gone above the trend channel it was forming since Oct-28th-2009.

In the 60 days hourly chart, MACD was diverging. But in the in the first year to date chart, the MACD is not diverging. So potentially this may not be the top. But a short term bull back is what I am expecting.

Market Update Nov-25-2009 (Before the Bell)

2009-11-25T05:17:00.004-05:00

As we indicated before, the market is moving inverse to U.S. dollar. As the value of U.S. dollar decreases, the price for stocks and gold is going high. Overnight price of U.S. Dollar Index Futures (/DX) was going down. So far it has made a 52 week low of 74.67 today morning at 5:00 A.M.

Gold Futures (/GC) made a 52 week high of 1,181.90 at 5:00 AM. As the dollar goes down, it is making new highs. But so far it looks like MACD is showing a negative divergence for gold futures in the hourly chart. This divergence is still not visible in daily chart.

As this is happening, E-mini S&P 500 (/ES) made a high of 1,109.49 at 3:00 A.M. It is below the previous high of 1,111 made on Nov-23-2009. At 5:00 A.M. when dollar made new lows, e-mini failed to make a new high.

Over all as the dollar is losing its value, it is having less of an impact on gold and stocks. Wave count at this moment is not very clear. As this is a short week, we were expecting some bullish corrective wave to happen with low volume. This could be wave 4, or a wave 5 ending triangle. We will wait for a pivot top to be made to for the bearish trend to start.

Market Update Nov-20-2009 (Before the Bell)

2009-11-23T08:19:00.001-05:00

Looking at the e-Mini S&P 500 (/ES), my previous forecast is not correct. Price has gone above the bearish acceleration channel (Red). It is back in our base channel (Green). E-Mini is now at 1,101. But the MACD has reached above the previous high at 1,109 on Nov-18th. This indicates a down trend should come.

If the price reached above 1,107, we have to consider the possibility that this small bearish trend we had for few days is over.

From the exact moment I expected a bounce on Gold Futures (/GC) on my previous posting, this has reached a new high of 1,167. It is now at 1,163.40. Now the lower trend channel for this is at 1,145. If it breaches bellow 1,145, we could expect the current bullish trend to be over.

The Fed Did It ...

2009-11-21T09:12:00.002-05:00

Another blogger at http://oahutrading.blogspot.com/ was sharing this video. I think it is worth sharing it here too. Check it out.

Market Update Nov-20-2009 3:45 P.M.

2009-11-20T15:50:00.001-05:00

As I indicated before this down trend to be a minor correctional wave is no longer valid. I am posting my updated projection based on today’s sideways move. So far this looks like a classic wave 4, A-B-C formation. We completed wave A by yesterday’s closing. We were forming wave B today. Wave B came just below the start of wave A. Wave C should have 5 waves which I have marked as i-ii-iii... Once we are done with wave 4, most probably on Monday, we should see wave 5 of the first wave down. This should bring SPX to around 1,070.

Technically to call it a bear trend, most analysts prefer 2 consecutive bearish days with the second day closing below the low of the first day. So we don't have that now. Most probably we want have this signal next week as it would be a short week for the holidays. I expect the volume to be low after the drop on Monday. That would be the ideal behaviour for a wave 2 bullish trend to come after we complete the 5 waves down.

Gold Futures (/GC)

2009-11-20T07:56:00.000-05:00

Gold futures just came out of the bullish trend channel. Unless it quickly reveres back into the channel, the bullish trend for the GOLD may be done.

e-Mini S&P 500 Index Futures (/ES)

2009-11-20T07:48:00.000-05:00

After spending some time analysing the market and posted a message, when I checked the e-Mini S&P 500 Index Futures (/ES), it is already below yesterday’s low of 1,086. So this is not a stopover for the bullish trend we had since Nov-02.

Market Update Nov-20-2009

2009-11-20T07:35:00.000-05:00

So the market dropped as I expected. So the Gold Futures bounced back 1,130 (Close to my target at 1,127). So what’s next?

Now all the charts are out of the bullish trend channel we had since Nov-02-2009. This trend channel was in action for 14 days (Nov-02 to Nov-16). I don’t think it will end in 3 or 4 days. This down trend could be a major trend reversal or it could be a correction to bullish trend channel we had since Nov-02. I am expecting it to be a trend reversal.

Since yesterday 10:00 A.M. market was forming flat to slightly bullish trend with very low volume. Looks like minor wave 4 in S&P 500 (SPX). I drew a base channel (Blue) and an acceleration channel (red). As per my labelling wave (i) ended around 1,105. We have some resistance at 1,102.

Suppose if SPX goes over 1,102, we are out of the acceleration channel and back into base channel. In this case, most probably we had a correctional (a)-(b)-(c) structure since Nov-16th, and the bullish trend may be continuing.

Suppose if SPX drops to 1,080, we will be touching the lower end of the acceleration channel, which we could label as wave (v) and that would complete a five wave motive structure. We could expect a wave 2 bounce back.

So today if the SPX go below yesterday’s low at 1,088, we are in down trend. If it goes over 1,102, it was a correctional move and the bullish trend continues.

Considering it is Friday of the options expiry week and next week is going be a short for thanks giving, the bullish trend could continue with low volume. Today’s action may let us know if this bullish trend is a continuation of the trend we had since Nov-02 or is it going to be wave 2 of the down trend.

The un-employment report, housing starts and other economic indicators are mostly negative. But this market has nothing to do with that. It is all about the US dollar. If it goes down, the market picks up, if it goes up, market sinks. For example, yesterday till around 11:00 A.M. US dollar index fund (UUP) was bullish and the market was bearish. After that UUP was down and the market was up. This behaviour is in for few months now.

Gold Futures (/GC)

2009-11-19T05:24:00.001-05:00

Gold was having a resistance/support level around 1,144. As per today morning futures it has broken that support line and heading south. I am expecting the next support at 1,127. Also the lower line of the bullish trend channel it had for this since Oct-28-2009 is around that price range. Will it break thru that or will it bounce back?

Please write your comments or rate this article, if you like my posting or not.

Market Update Nov-19-2009 (Before the Bell) – Are we there yet?

2009-11-19T04:45:00.003-05:00

Yesterday morning as we expected, the market came down. S&P 500 (SPX) came down to 1,102.70 and Dow Jones Industrial Average (DJX) came down to 10,360. Day before yesterday’s bottom for SPX was 1,102.29 and DJX was 10,362. So as we expected it was right on target.

S&P 500 (SPX) 60 Days Chart

Dow Jones Industrial Average (DJX) 60 Days Chart

Day before yesterday’s bottom for NASDAQ (NDX) was 1,797.74. Yesterday morning when SPX and DJX touched the bottom, NDX touched 1,790.93. So, this again came close enough to our target. Up to this, my yesterday’s prediction came true.

NASDAQ (NDX) 20 Days Chart

The issue is, now NASDAQ (NDX) came out of the bullish trend channel it was forming since Nov-02-2009. By the end of the day SPX and DJX also came out of the channel. Also the bounce back we had after yesterday morning bottom did not make a new high.

Initially I thought this wave 4 is still continuing. Looks like some type of triangle formation. This may be true for SPX and DJX. But NDX touched another bottom of 1,789.66 at 1:00 P.M. Also the formation for NDX does not look like a triangle.

With these factors and looking at today morning e-Mini S&P 500 Index Futures (/ES), makes me believe that the down trend has started. As per my labelling hear, this is the start of the new P3 down trend. But that is arguable. We will wait for more confirmation on that.

S&P 500 (SPX) 60 Days Chart

e-Mini S&P 500 Index Futures (/ES) Hourly Chart as of 4:30 A.M.

Market Update Nov-18-2009 (Before the Bell)

2009-11-18T08:52:00.001-05:00

Yesterday market was on a sideways consolidation move. This could be considered as wave 2 for the drop we had day before yesterday or it could be wave 4 of the final wave 5. Dow Jones Industrial Average (DJX) reached high to touch the high we had day before yesterday. So it is not possible to be wave 2. Overnight e-Mini S&P 500 (/ES) also reached close to the high we had day before yesterday. So this is not wave 2.

The bullish trend we had since yesterday afternoon looks like wave B of the 4th wave. Today morning we might have a drop in S&P 500 (SPX) close to 1,100 and NASDAQ (NDX) close to 1,800 which is around wave A of the 4th wave. If this happens, it would be wave C of the 4th wave. Then we should bounce back to form the wave 5 of wave 5.

Dow Jones Industrial Average (DJX) is touching the upper trend line of the bullish trend we had since yearly this year. So for this to go higher it has to break the upper trend channel. It could be making a thro over. Meaning, it may go over the trend channel and quickly come back within a few hours. If it stays over the trend channel, it will look like it is accelerating the bullish trend. If so this bullish trend is not coming to an end any time soon for Dow Jones Industrial Average (DJX).

Today is Wednesday on an option expiry week. Typically the volatility should rise. A zigzag move to form the final wave 5 and possibly a drop in the evening is what I am expecting. If the stocks do not bounce back in or before the afternoon, the bullish trend we has since yesterday afternoon could be the truncated 5th and final wave.

Market Update Nov-17-2009 (Before the Bell)

2009-11-17T07:49:00.001-05:00

Yesterday Dow Jones Industrial Average (DJX) has reached our target at 10,427. It reached as high as 10,434. This is where the upper trend channel meets the 2007-2008 down trend channel. We hope this would be the top for this.

S&P 500 (SPX) did not reach our target of 1,121. Yesterday it reached as high as 1,113.69. But the wave count of the bullish trend since Nov-02-2009 indicates a possible completion of 5 waves or it may reach high one more time to complete it. So, yesterday or today could potentially be the top.

In comparison with 2007-2008 down turn, NASDAQ (NDX) made over the 61.8% retracement at 1,773. This went has high as 1,807.6 and closed below the retracement level.

Today morning so far e-Mini S&P 500 looks very choppy. Meaning it looks like some form of correctional wave. This could for the drop we had yesterday evening or it could be part of 4th wave of the expected 5 wave structure from Nov-02-2009.

Today we are hoping to have some confirmation indicating if yesterday was the high or not.

Market Update Nov-16-2009 (Before the Bell)

2009-11-16T09:22:00.001-05:00

Market was bullish on very light volume on Friday. Looks like, the bullish trend continues today morning in the futures market. As this is the option expiry week, the volume should pickup.

S&P 500 (SPX) is approaching the 50% retracement at 1,121. If the bullish trend continues, the upper trend channel of the current bullish trend will meet the base trend channel of the 2007-2008 down trend for Dow Jones Industrial Average (DJX) and S&P 500 (SPX). This could be the next resistance for SPX and DJX.

S&P 500 (SPX)

Dow Jones Industrial Average (DJX)

Upper trend channel has gone over the down trend channel for NASDAQ (NDX). Therefore this argument is not applicable for NASDAQ.

NASDAQ (NDX)

In all three cases, MACD has reached a level above the high before the downtrend started in 2007. This suggests that a next down trend should start anytime soon. Many possible wave counts are indicating that we are in the final wave 5 of some sort.

Why is this market going up?

2009-11-14T13:23:00.000-05:00

Right now we have multiple wave count possibilities exists. Some indicates we are in wave 2 of 2 of 1 of C. Others say we are in 5 of 5 of C of B. Then others say we are in 5 of 5 of A of B. Did I confuse you enough? My point is the wave counts at this junction are confusing. Technical analysis indicates we could potentially go a little high and it is going to drop. Well, that’s what it was indicating for sometimes now.

So why is this market going up? Check out this video.

Improvements to this blog

2009-11-14T11:34:00.001-05:00

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Update: e-Mini S&P500 Futures (/ES)

2009-11-13T09:17:00.000-05:00

Looks like the correctional wave we had since yesterday 3:30 PM has ended. The down turn resumes.

Market Update Nov-13-2009 (Before the Bell)

2009-11-13T06:16:00.001-05:00

So the market is coming down again. By now most of the bears are not going to believe that this is the one. May be they are correct. This may not be the one. We need more confirmation. On the previous wave down, on Nov-02-2009 S&P 500 (SPX) came down to 1,029. Suppose if the current drop goes way below that, it would be the first time in the since Mar-2009, we are finding a lower low. Until now we are seeing higher high and higher lows. That would indicate that the down trend has started.

Suppose if it comes close to 1,029 and goes back up again, we could consider this drop to be wave C of an A-B-C correction since Oct-21-2009. Or it could be completion of the first wave down and the follow thru is wave 2. The verdict on this would depend on if the bounce back creates another high or not. If the bounce back is another high, that would hopefully be the 5th and final wave of the wave C of the bullish trend we are facing.

The other possibility is that this down turn bounce back up way before reaching 1,029. In this case it could be forming ending triangle or some form of wave 5 is still continuing.

Hopefully today we should get some confirmation.

So far e-Mini S&P500 Futures (/ES) is trending up since yesterday evening 3:00 P.M. But the slope and nature of it looks like a correctional wave so far.

Market Update Nov-12-2009 (Before the Bell)

2009-11-12T04:41:00.003-05:00

By now most of the bears would have given hope that this market is going to go down in the near term. Yesterday Dow Jones Industrial Average (DJX), touched the 50% retracement line at 10,334. Also this was close enough to touch the upper trend line. As per the following chart of DOW, this might have hit the final wave up. To get this working this way, we have to consider the high of Aug-04-2009 at 9,320 to be wave (1). On Aug-07-2009 and on Aug-12-2009, the chart has touched the 38.2% retracement at 9,422. We have to consider those as part of wave (2) correction. This way, wave (4) will not be moving into wave (1)’s range. Otherwise that would violate one of the rules of motive waves.

One issue with this labelling is that wave 2 and wave 4 are both flats. As per “Elliott Wave Principle” guidelines (Page 96), “Wave 4 will almost always be a different corrective pattern than wave 2”. This is not a rule. So it may still be valid.

If yesterday was the high, wave (5) of wave (C) in S&P 500 (SPX) would be a truncated wave (5). In the following chart, I am providing the base channel for the drop that started in 2007. This channel connects the start of the drop with end of wave (2) of the previous drop. Suppose if the bullish trend continues, the upper trend line of this channel would meet the 50% retracement of SPX at 1,121 shortly. When it is meeting the upper trend line of current bullish trend channel also will be close enough to meet the 50% retracement. So that would be an ideal target for the current bullish trend to end.

Finally to give a boost to the bears who were so sober and sad, in the following e-Mini S&P 500 futures chart, price is going down below 1,090. Volume is also increasing. May be something is happening....

Yesterday at 10:00 A.M. e-Mini had a spike reaching the high at 1,103. In the hourly chart volume was at the peak. In the daily charts, the volume was gradually decreasing in the last bullish wave up. Those are typical behaviours of a top. Is this a top or THE top?

Market Update Nov-11-2009 (Before the Bell)

2009-11-11T09:11:00.003-05:00

Market still continues going up as we expected. This short term bullish trend may come to an end this week for the following reasons:

1. S&P 500 (SPX), NASDAQ-100 (DRM) (NDX) and Dow Jones Industrial Average (DJX) are all approaching the upper trend line.

2. All three are approaching their 50% retracement of the initial down tern we had since Oct-2007. Dow Jones Industrial Average (DJX) at 10,334. S&P 500 (SPX) at 1,121. NASDAQ-100 (DRM) (NDX) at 1,773.

Those factors are supporting the bearish sentiment. Further analysing the wave structure of this bullish trend makes it very difficult to label any A-B-C corrective wave structure. Here we are providing a possible impulse wave structure. This could be wave A of a zigzag retracement structure. Once it is complete we should see a wave B structure forming that will span for several months and wave C of this retracement could complete close to 61.8% - 78.6% retracement. This will contradict with many of the assumptions we had so far. The zigzag wave structure we saw for the last few days will fit into wave B of the 4th wave. Wave C of the 4th wave should retrace back to the lower trend line.

Dow Jones Industrial Average (DJX) Since APR-2007

Dow Jones Industrial Average (DJX) Year to Date

At this moment this is a rare possibility. But it will keep our options open for possible bullish trend to go on for over a year. Think about it, a down turn we had from Oct-2007 to Mar-2009 spanning for 15 month of impulse wave could it have only 8 months of retracement for the current retracement to be completed?

Market Update Nov-10-2009 (Before the Bell)

2009-11-10T08:03:00.000-05:00

At this junction, the short term wave count is not clear. This might look like expanding ending diagonal. As per “Elliott Wave Principle”, “A very small percentage of diagonals appear in the C-wave position of A-B-C formation” (Page 37). On the same page it says “We have found one case in which an ending diagonal’s boundary lines diverged, creating an expanding diagonal rather than a contracting one.” So, expanding diagonals are very rare.

As the short term charts cannot be labelled properly, we analysed the year-to-date charts of S&P 500 (SPX), NASDAQ-100 (DRM) (NDX) and Dow Jones Industrial Average (DJX). They all indicate:

1. They are all approaching the upper trend that we have since March-2009. Most probably it will reach close to that point and retrace again.

2. The MACD and RSI technical indicators are in negative divergence. This does not support the bullish trend we have so far.

Dow Jones Industrial Average (DJX):

S&P 500 (SPX):

As we don’t have a clear wave count, we cannot say that we are in the final wave up. But as the technical indicators are bearish, we cannot say that we are in a bullish trend to put our money on a bullish trade on these charts.

Over-all we cannot make a directional trade on SPX, NDX or DJX. But individual stocks have its own patterns.

Market Update Nov-09-2009 (12:00 noon)

2009-11-09T12:03:00.000-05:00

S&P 500 (SPX) and NASDAQ-100 (DRM) (NDX) has gone over the 76.6% retracement level today. But as long as it is below the start of wave 1, we could still call it a wave 2. But Dow Jones Industrial Average (DJX) has gone over the start of wave 1 at 10,117. So this is not wave 2, at-least for DJX.

We will have to re-calculate our wave counts again. For the moment, we will wait and see where this up trend is ending.

Market Update Nov-06-2009 (After the Bell)

2009-11-07T08:16:00.000-05:00

The wave structures looks like the wave 2 has reached its target. But instead of doing a nose dive, it is continuing a sideways correction. I consider this as a W-X-Y combination of corrective structure. It should be completed early next week.

The un-employment data does not look like a strong enough catalyst for the move down. Chart patterns looks like the next move requires more consolidation to be done, to get the technical indicators to a more over-sold condition.

E-Mini Dropping

2009-11-06T08:52:00.002-05:00

Since 8:30 A.M, e-Mini S&P500 index futures are dropping. Relative to yesterday’s and overnight action, this seems to be big. As we were about to complete wave C of wave 2, the position of this drop means a lot. This could be the start of the big drop.

Let’s put the blame on weaker job market report. We needed this catalyst for the action. Is this a co-incidence or this is how the social psychology works?

Market Update Nov-06-2009 (Before the Bell)

2009-11-06T02:10:00.001-05:00

Yesterday’s uptrend in the market makes our wave labelling invalid. I am posting an updated 20 days chart with wave labelling bellow:

S&P 500 (SPX)

Dow Jones Industrial Average (DJX)

NASDAQ-100 (DRM) (NDX)

In all these cases the uptrend should be completed soon. If this trend keeps going, we will re analyse it again.

In the following 60 days chart of the SPX, we can see that MACD and RSI have reached close to the previous over bought level at the end of wave {B} on Oct-21-2009.

Market Update Nov-05-2009 (Before the Bell)

2009-11-05T07:12:00.001-05:00

The uptrend that was completed yesterday is our wave c with 5 inner waves up. This has retraced slightly over 78.6% of wave i. Wave i started at 1,066.83. As long as wave c is below this level, we can say that this is wave ii.

Suppose if the market turns moves up today and goes over 1,066.83, we will have to re-label our chart. Yesterday evening’s down turn and the afterhours market shows a 5 waves down. That was a very vigorous move. Suppose if the wave ii is in fact only wave A of a bigger wave 2, yesterday’s down turn should have been wave B. But it does not look like that.

So, this could be the steep wave 3 that were looking for. If so, it would retrace lot of gains we had for since Feb-2009 in a short period of time.

In NASDAQ-100 (DRM) (NDX) wave ii is at a perfect 78.6% retracement of wave i.

In DJX, similar to SPX, wave ii has retraced slightly over 78.6% of wave i.

As in all three cases, the 2nd wave we saw yesterday did not retrace over the minute wave i, we are very confident that our set of 1-2, 1-2 labelling is correct. This is the similar pattern we saw in Oct-2007 when the C of the first down turn started. Now again we are facing the wave C of a larger degree. We are expecting to see a 5 wave structure for this wave C that would take a few years to complete. Probably it will end in 2011 as per our grand cycle chart.

Market Update Nov-04-2009 (Before the Bell)

2009-11-04T09:20:00.004-05:00

Today morning futures market is drastically up. It could be a continuation of the wave C of wave ii correction we indicated yesterday.

As most Elliott wave analyst have indicated, may be wave 5 of the SPX has completed and this may be the correction for the downtrend we saw since Oct-22nd. But this would not explain the wave formation of NASDAQ-100 (DRM) (NDX) or Dow Jones Industrial Average (DJX).

We hope today’s market action will clarify either way.

Market Update Nov-03-2009 (Before the Bell)

2009-11-03T06:36:00.000-05:00

Our yesterday’s wave labelling is still intact. We have identified yesterday’s correction as a flat a-b-c correction. The wave c that we saw yesterday evening looks like an ending triangle. Today’s futures market looks bearish. May be we could start the session with a typical gap down in wave 3.

Following is my wave labelling for NASDAQ-100 (DRM) (NDX). In this we can identify 3 sets of 1-2 labelling, unlike 4 in SPX and DJX. Wave [1] started at 1,780.83. As per wave principles, wave [2] cannot go over the start of wave [1]. The wave [2] ends at 1,778.61. So wave [2] is qualified to be so only by 2 points.

If we are correct, we should see a wave 3 forming that breaks the lower trend line and forms a steep down trend. If the market moves up, we will consider other possibilities as per our yesterday’s posting.

Market Update Nov-02-2009 (Before the Bell)

2009-11-02T08:57:00.000-05:00

As of our last market update on Oct-30-2009, we indicated that we are in wave 3. Many Elliott Wave analysts in the web have forecasted the Friday’s down turn to be wave 5. Therefore they are expecting a strong wave 2 to be forming this week. The personality of the wave we saw on Thursday and the personality of the wave we saw on Friday make us believe otherwise.

If Friday was wave 5, then we should have seen a negative divergence in MACD and RSI. But Friday’s move has taken the MACD level to be close to the previous wave (1) on Oct-22-2009. Between Oct-26-2009 and Oct-29-2009, MACD was contacting. Also the wave was not the steepest or took the least amount of time. Therefore this is unusual to be wave 3. Therefore Thursday’s move up could not be wave 4.

Unlike a typical wave 4, the Thursdays uptrend was steep and the volume was contracting. The only issue is that the retracement was less than 50% of the previous wave. So we could consider Thursday’s uptrend to be wave A of wave 4. In this case, Friday’s down turn should be wave B. But the personality of Friday’s move does not look like wave B. If we ignore that, we could expect a strong wave C to be forming today that could take us slightly above Thursday’s high of 1,066.83. Previous wave 1 ended at 1,075.48. So suppose if we are still in wave 4, the upcoming wave C of wave 4 should not reach above 1,075.48.

Suppose if Friday’s down turn was wave 5 indeed, as many analyst think, then we should be seeing a wave 2 forming that retraces the down we saw since Oct-22nd.

Today’s action should give us more clues. For the moment we think that we are in wave 3. So any uptrend we see today will be considered as another wave 2. In this case, any uptrend should not reach above 1,066.83.

Market Update – Oct-30-2009

2009-10-30T13:35:00.000-04:00

We are in wave 3 now. The A-B-C structure that was not very clear in yesterdays up trend was probably a zigzag.

Dow Jones Industrial Average (DJX) - Oct-29-2009 (After the Bell)

2009-10-29T19:07:00.000-04:00

As a reader pointed to us, when we analyse the structure for DJX, today’s up trend overlaps wave [1]. This suggests that we may be forming a set of wave 1-2, 1-2 combinations before we hit a strong wave 3. This was our original expectation as I pointed out on Oct-27-2009.

Tomorrow if DJX goes over 10,100 or SPX goes over 1092, we have to redo the wave count. On the other hand, if our wave count is correct, we should see the wave 3 forming.

Today, RSI has reached the overbought territory in this 10 days chart. MACD and RSI pattern indicates it has to be wave 2 on both SPX and DJX. Because today’s uptrend in SPX did not reach the wave 1 territory, we initially suggested it could be wave 4.

If this is wave 2, we still haven’t seen a clear A-B-C pattern. The retracement in DJX is less than 61.8% and retracement in SPX is less than 50%. So tomorrow we may see a small wave B forming and wave C going up close to 78.6% retracement as we saw in the previous wave 2. Wave 3 might start by Monday.

So basically tomorrow stocks will either go up or go down. We guarantee you that. We hope these final statements clarify everything. :)

Market Update Oct-29-2009 (After the Bell)

2009-10-29T16:24:00.000-04:00

Today’s up trend clarifies a few things for us. I have re-labelled my wave counts. Yesterday’s bottom looks like wave (3). Wave (4) is in the range of previous 4th wave. Todays up trend could also be wave A of wave (4). If I am correct, tomorrow we should see wave B of wave (4) or wave (5) forming.

Tomorrow if DJX goes over 10,100 or SPX goes over 1092, we have to redo the wave count. On the other hand, if our wave count is correct, we should see the wave 3 forming.

Today, RSI has reached the overbought territory in this 10 days chart. MACD and RSI pattern indicates it has to be wave 2 on both SPX and DJX. Because today’s uptrend in SPX did not reach the wave 1 territory, we initially suggested it could be wave 4.

So tomorrow charts should form wave 4 or it may go over the start of wave (1) and we have to redo the wave counts.

So basically stocks can will either go up or go down. We hope this statement clarifies everything :)

Market Update Oct-29-2009 (Before the Bell)

2009-10-29T09:01:00.000-04:00

Yesterday we labelled wave (3) at 1,060.78. This is still valid. In the A-B-C retracement after wave (3), wave A was perfectly touching the 38.2% Fibonacci number at 1,072.46. Also this is below the wave (1) at 1,074.19. So we could label this A-B-C structure as wave (4). If so wave (5) is in progress. Wave (5) started at 1068.56. The law so far is 1042.19 with the length of 26.37. Yesterday we identified the length of wave 1 to be 27.05 and length of wave (3) to be 30.97. As they are both close enough to be same size, wave (5) should be an extended wave that is still in progress.

The issue with this is that, if we draw a channel connecting wave (1) in parallel to wave (2) and (4), wave (3) does not come even close to touching the trend line. So may be wave (3) is still in progress. This A-B-C structure could be wave 2 of wave (3). In this case, we should expect a steep decline today. Early morning futures market doesn’t look like that is the case. So let’s wait and see.

On Oct-20-2009 we started predicting this decline. Now this has crossed below the 50 days moving average and came below all the trend lines, we may see many more analysts predicting the down trend. Once the 50 days moving average crosses the 200 day moving average, institutions may start dumping.

Harris Corporation (HRS)

2009-10-28T11:42:00.000-04:00

This stock is in a down trend since May-30-2008. The down trend should have an {A}-{B}-{C} structure. Wave {A} completed on Nov-21-2008 at $25.60. That was a 5-3-5 zigzag. Since then it was forming wave {B}. We believe wave {B} was completed today at $43.00. If so, wave {B} has a flat structure which I marked as [A]-[B]-[C]. Wave [A] competed at $42.04 on Feb-09-2009. Today’s high so far is just above that.

Wave [C] has a 5 wave structure as it is supposed to be. At $43.00, it has touched our channel line. In the 60 days chart RSI has reached the overbought territory. The RSI, MACD negative divergence is not clear in the 60 days chart. But we can identify that in a 6 month or longer term chart. Wave (4) was at $37.50 and I consider that to be our short-term target. It should go below wave [B] at $25.94 in a few months.

Market Update Oct-28-2009 (Before the Bell)

2009-10-28T07:23:00.000-04:00

For last 2 days S&P 500 is in a sideways movement sloping down. It could be part of wave 3 or wave 4. As per our labelling wave 1 started at 1,101.36 and ended at 1074.31 with a length of 27.05. Wave 3 started at 1,091.75. Suppose if wave 3 ended at 1,060.78 as I labelled it, it would have a length of 30.97. This is close to the length of wave 1. So we should expect wave 5 to be an extended wave. This theory is valid as long as the progressing wave 4 does not go over 1,074.31 as wave 4 cannot go into the range of wave 1 as per Elliott wave rules. If it reached above this, we have to consider other possibilities as per my yesterday's update.

Update: Coca-Cola Ltd. (KO)

2009-10-28T06:49:00.000-04:00

On Oct-07-2009, we started covering Coca-Cola Ltd. (KO). At that time we indicated the completion of 5th wave motive structure. So we were expecting it to start a down trend from it. Few days later, we indicated that the down trend does not look like wave 1, and it may have another small wave going up to complete the structure.

On Oct-19-2009, it completed the structure by going up to $55.50. Since then we can identify a down trend. The first wave came down to $53.18. This could be considered as wave A or wave 1 of wave A. We are in the process of completing wave B or 2 of wave A.

Update: Anadarko Petroleum Corporation (APC)

2009-10-27T20:06:00.000-04:00

On Oct-08-2009 we initiated the watch on APC. We indicated that it is going to start a down trend. So far we were able to identify waves (1) and (2) of this down trend. As it has a long way to go we may see an extended wave (3).
This one is now touching the trend line. We hope it will break the trend line very soon. If it bounce back over $68.00, we have to reconsider our wave counts.

Update: 3Com Corporation (COMS)

2009-10-27T19:53:00.000-04:00

We forecasted 3Com Corporation (COMS) to start a bearish trend on Oct-11-2009. At that time we identified that it was forming the final wave 5. With the last 2 days of action, we can see that it has completed the wave 5 and it has started the down trend. So far we can see only a minor wave 1. If we are correct, we should see a bounce back on wave 2 that should not exceed $5.95.

Market Update Oct-27-2009 (Before the Bell)

2009-10-27T07:29:00.001-04:00

So we had an uptrend yesterday morning. As we expected it did not reach the previous 78.6% retracement level. But this did not form a descending triangle. So I have labelled this whole retracement as complex {W}-{X}-{Y}. Now we are done with wave (2) retracement. So I think wave (3) is in progress.

As I indicated yesterday, we may be still forming a few 1-2, 1-2 structures before hitting the strong wave 3.

Market Update Oct-26-2009 (Before the Bell)

2009-10-26T07:33:00.000-04:00

As I indicated in my previous market update, after the drop on Thursday, it was forming a 5-3-5 zigzag. The final fifth wave of it ended on Friday morning at perfect 78.6 retracement of wave (1). We expected this to be wave (2). But the drop we saw on Friday does not look like wave (3). So, I suspect this 5-3-5 structure to be wave (A) of the second wave. So Friday’s drop should be wave (B). If so, we should expect wave (C). If wave (C) also comes close to the 78.6% retracement of wave (1), we could expect that to be the end of second wave. But I doubt that would happen. So the other possibility is that it could be forming a descending triangle. If so, we should see (C) going up today and, wave (D) coming down close to 1075 and then goes up to complete wave (E). In this case, wave (C) should be below wave (A) and wave (E) should be below wave (C).

Either way we are in the middle of the retracement for the Thursday’s drop. Once it is complete, we should start forming wave (3). If we look at the early days of the 2008 drop, in November-December period of 2007, we saw a few waves 1-2, 1-2 structures before forming a strong wave 3. I expect it to be forming similar structures before a strong wave 3 to be coming. So even after the completion of our retracement for Thursday’s drop, we may see just a few hundred point drop, which we could considered as wave 1 of wave 3.

Suppose if it the market goes above start of wave (1) at 1,101, we will expect the uptrend from July has not completed.

Within the stocks we watch, we saw a huge surge on Amazon (AMZN) last Friday. This is what we predicted as wave 3 of the final motive structure. So the uptrend for AMZN is not complete. We should see wave 4 drop and a wave 5 going up. As wave 2 for this was a flat shallow retracement, wave 4 could be a deep retracement.

Market Update Oct-23-2009 - Before the Bell

2009-10-23T09:11:00.000-04:00

Day before yesterday we had drop that took S&P 500 (SPX) from ... to .... This made us believe that the down trend has started. Yesterday’ up trend that took SPX from ... to ... makes us puzzled with what is going on. We could not clearly identify 5 waves in the downtrend we saw day before yesterday. But that could be because the market was closed during the period it is supposed to have the 4th wave. In the uptrend we saw yesterday, we could identify a 5-3-5 zigzag formation. If my labelling is correct, SPX should not go over 1095. That should complete wave 2 and wave 3 should start. There are many other ways in which I could have labelled it. As the futures market is up today morning, I could be wrong.

In the following 20 days chart of SPX we see that MACD and RSI are still on negative divergence. So I believe this up trend is coming to an end. But depending on if it goes over 1108 or not, my wave count would differ as I indicated 2 days ago.

This market has been a challenging one for the analysts to figure out. So don’t trade on the index based on my count. We will wait for some more confirmation.

Danaher Corporation (DHR)

2009-10-22T13:07:00.000-04:00

Danaher Corporation (DHR) is in a bear market since December 2007. It completed its wave [A] (marked in red), in December 2008. Since then it was forming wave [B]. Wave [B] has an (A)-(B)-(C) structure that I marked in blue.

Wave (B) of wave [B] was completed on Aug-14th, 2009. Since then we are able to identify a five wave structure that I marked as i-ii-iii-iv-v. This completes wave (C) of wave [B]. Today’s (Oct-22-2009) high shoots over the upper trend line of the wave [B] channel. In the 1 year chart, we were able to identify a negative divergence in RSI and MACD. So we believe that a bear market for this has resumed forming wave [C].

The completion of wave [C] should take about a year. Wave iv of wave (C) started at 64.39. For the short term we could target this price in a month’s time.

Market Update Oct-21-2009 End of day

2009-10-21T19:06:00.000-04:00

Today’s market action confirms our forecast for of trend change. Yesterdays down trend seems to be a 4th wave minor correction. Todays up trend in SPX went high as 1,101. This is just 6 point shorter than our maximum target for this up trend to be considered the final 5th wave.

I have relabelled our 60 days S&P 500 chart to what the most probable case is.

CBOE Volatility Index (VIX)

CBOE Volatility Index (VIX) is a measurement of market volatility. In bull market this tends to go lower. In bear market, this tends to go higher. When the trend is changing, the direction for VIX also tends to change. Today after 3:00 P.M. we got a big surge in VIX. This is another confirmation of our trend change.

Following chart for VIX for the current month indicates our trend change.

Market Update Oct-21-2009

2009-10-21T07:36:00.001-04:00

Yesterday before the market opened, we analysed a few possibilities. As S&P 500 did not touch 1108.13, we are inclined to believe that the major down turn has started. We may change our opinion if it bounce back again to go over 1108.13.

Within the stocks we follow, on Oct-13-2009, I indicated that Coca-Cola (KO) still had a chance to make a small wave up. It completed that wave on Oct-19th. We believe it is in a down turn now. Oil Service HOLDRs (OIH) is in 4th wave down. Once it is completed, we expect it to go up to complete wave 5.

3 COMS (COMS) is either trying complete its final 5th wave or it is in a minor wave 2. Either way, it will be in down turn very soon.

Market Update Oct-20-2009

2009-10-20T03:52:00.000-04:00

The overall market is still bullish. Analysing S&P 500, one possibility is that it should complete wave [C] (marked in red) around 1105 to 1110. In this case wave (1) (marked in blue) started at 886 and completed at 1018 with a length of 131.20 points (1018 - 886.80). Wave (3) started at 991.97 and completed at 1080.15 with a length of 88.18 (1080.15 - 991.97). Wave (5) started at 1019.95. As per Elliott Wave principles, wave (3) cannot be the shortest wave. So the maximum potential value for wave (5) is 1108.13 (1019.95 + 88.18).

In comparison to the 2008 drop from 1576.09 to 666.79, SPX would have a 50% retracement at 1121.44. Currently the MACD and RSI are on negative divergence. So SPX could go up to the 50% retracement and turn down. If that happens, the 5 waves we marked in blue will be the completion of wave 3 of wave [C]. In this case, as wave 2 was a shallow retracement of 23.6% the wave 4 could be a sharp retracement as per Elliott wave guidelines. So this could be a 78.6% retracement to 1038. But as per Elliott Wave principles, wave 4 cannot be in the range of wave 1. So the maximum it can retrace would be 1080.15.

The other more bullish possibility is that the current wave that is reaching the 50% retracement is a new wave 1 of wave 3.

Analysing the Dow Jones Industrial Average (DJX), the blue trend line is still approaching the green trend line at 10,225. Similar to S&P 500, DJX also could have various possibilities.

Oil Service HOLDRs (OIH)

Yesterday we identified that our wave could for Oil Service HOLDRs (OIH) was in correct. This looks like it is completing 3rd of the 3rd wave required to complete the 5 wave structure for wave (C).

In comparison to the 2008 drop, it has a 50% retracement at $143.18. We will consider a trend reversal close to that price range.

Oil Service HOLDRs (OIH)

2009-10-19T11:02:00.000-04:00

My initial wave count for this is wrong. The price of this has gone above my upper target. But the MACD and RSI are still on negative divergence. So we will hold on to our bearish trend prediction till the end of today. Today, if it closes above $130.00, to reduce our risk, we will trigger our stop loss. Otherwise I will publish my alternate wave count tomorrow.

Market Update – Oct-16-2009

2009-10-16T09:05:00.000-04:00

We had a small drop yesterday morning. But that was not the start of our bear trend. The price range is still within our blue trend line. If it will stay till Monday (Oct-19-2009), the blue trend line will be meeting the green trend line. That will be around 10,225. That would be our next target. But many other Elliott wave analyst believe that it may not last that long. We will see. This is not a high probability prediction like others I post. This is just to keep the discussion going.

In the stock list we watch, Anadarko Petroleum Corporation (APC) had a big drop yesterday. This could be the beginning of the new trend we were forecasting. This stock started trading with a gap. This gap did not get filled within the trading day. If the gap is not filled within a few days, that will confirm our prediction. Following news article is trying to justify the reason for the drop:

http://www.marketintelligencecenter.com/articles/971826

3COM is also started to drop. But this drop is only 2.57%. We will wait for more confirmation to confirm our new trend.

Applied Materials, Inc. (AMAT) is still within our wave (B) trading range. I have no idea how long this is going to be in it. It is not very interesting. So I am going to drop that from the list of stocks we watch.

Amazon (AMZN) is still forming a wave 2. As long as it is above $88.79, it has a chance of going up on wave 3.

We have initiated a new watch on the ETF OIH.

Oil Service HOLDRs (OIH)

2009-10-15T15:52:00.000-04:00

Since July-02-2008, this fund is in a down trend from $226.00. Primary wave [A] came to an end on Dec-05-2008 at $60.36. Since then it was forming primary wave [B]. I have marked the primary wave in red.

Today at $129.10 I believe it has reached the target for primary wave [B]. The intermediated level wave (C) had a 5 wave structure as it is supposed to have. I have marked the intermediate level in blue color. Wave (1) of (C) went from $86.70 to $107.97 with a length of $21.27 (107.97 – 86.70). Wave (3) of wave (C) went from $102.30 to $121.40 with a length of $19.30 (121.40 – 102.30). So wave (3) is smaller than wave (1). As per Elliott wave principles, wave 3 cannot be the shortest wave. So wave 5 cannot be bigger than wave 3. Wave 5 started at $110.46. So the maximum it can go is up to $129.76 (110.46 + 19.30). So we will have our stop loss at $129.76.

In the 60 days chart I am providing the channel for intermediate wave (C). The wave (5) has touched this channel. That is why I am initiating a watch on this chart in our blog. MACD divergence is also confirming my argument.

In the primary wave [A] this index lost $165.64 (226.00 – 60.36). It cannot reach that much in wave [C]. So let’s look in percentage. Primary wave [A] lost 73.3%. Suppose if wave [C] looses this percentage, the target for this fund is $34.46 (26.7 % of 129.10). Primary wave [A] took 153 days to reach the target. 153 days from today is Mar-17-2010. So that is our target date to complete primary wave [C].

Market Update – Oct-15-2009

2009-10-15T09:21:00.000-04:00

Today and tomorrow are our make or break days I believe. Many Elliott wave analysts believe that around 10,100 should be the target for the current trend and it should come down. The big wave III should start.

If the Dow Jones Industrial Average crosses over 10,100 points and stays over it, I have to re-label my chart. My labelling in the following chart indicates that it might have reached the target with yesterday’s high.

I am providing multiple trend lines. If it breaks above the current blue trend line, the green trend line would be my next target. If it breaks above the green trend line, the red trend line would be my next target.

The stocks that we follow are all within our earlier expectations. Anadarko Petroleum Corporation (APC) is touching my upper trend line. If it does not break down today and keeps going up, I will have to re-label my chart. Yesterday before the market opened, 3COM (COMS) reached my target price ($5.92). May be that was it, or it might try to touch that again.

I am posting this message before the market opens. Early morning futures are supporting my expectation. Once the market opens, the actions will give me more clues. But it will be less of a challenge for me :)

Market Update – Oct-13-2009

2009-10-13T16:56:00.000-04:00

Many Elliott Wave analysts believe that the market is in an uptrend. This should take Dow Jones Industrial Average to somewhere below 10,100 points and a major market crash is above to happen. The wave counts by the analysts all varies. This is a typical behaviour of a strong wave 2. In my own opinion I am not sure when this crash is going to happen. But I am sure it will.

Now let’s look at the stocks I was following in this blog.

3Com Corporation (COMS)

Earlier I indicated that this stock is forming wave 5 of wave (5). Wave (1) went from $3.84 to $4.89 a length of $1.05. Wave (4) started at $4.92. Therefore my typical target for wave (5) would be $5.97 ($4.92 + $1.05). Yesterday at $5.85 this stock made a U turn. But the formation after that looks like wave 4 instead of a wave 1 of a new bearish trend. May be we are in wave 4 of wave 5. In either case, it should be in bearish trend very soon.

Anadarko Petroleum Corp. (APC)

The uptrend move we saw for this was not what I expected. But the MACD was still in divergence and stock price was within the upper trend line that I marked in my earlier 60 days chart. Today’s price action confirms that we have started the down trend for this.

I have adjusted my wave [C] to $69.05. As long as it does not close above the upper trend line (which is now at $69.00), I believe we are in down trend.

Amazon.com, Inc. (AMZN)

On Oct-08-2009 AMZN completed a new 5 wave motive structure. This I have labelled as wave (1). We are in an A-B-C correction forming wave (2). Once it is completed, we should see a strong 5 wave structure creating wave (3).

Applied Materials, Inc. (AMAT)

As I was expecting in the previous article, this is still bullish. But the wave structure is a bit complicated. My earlier wave labelling does not seem to be right. I’ll let the formation complete to be able to properly identify the structure.

Coca-Cola (KO)

As I indicated before, this has one more up trend which was completed yesterday (Oct-12-2009) and this is now in a bearish trend I believe. But the uptrend we had yesterday doesn’t look like a motive wave. We may still have one more wave to go up. We will wait and see.

3Com Corporation (COMS)

2009-10-11T17:02:00.000-04:00

3Com Corporation (COMS) was selling at the lowest at $1.43 on Nov-21-2008. Since then it has formed 5 waves up trend. I have labelled the first 4 waves of it as [1], [2], [3], and [4]. Wave [5] has not been completed. So I have not labelled it. Wave [5] should have 5 waves in it. I have labelled 4 of them as wave (1), (2), (3) and (4). We are in wave (5) of wave [5]. It might have been completed or it is above to be completed.

Once we clearly identify this, we should have 3 waves down turn which I will label as wave [A], [B] and wave [C]. This wave could be a shallow wave that takes a lot of time to build or a deep wave that will complete in a short period of time. Mostly it will be a deep one. The first 5 waves and the following 3 waves will be labelled as wave (I) and wave (II).

Once wave (I) and wave (II) are complete, I am expecting a major wave (III) up trend that should take the price above $6.00.

In the attached 1 year chart, you will see that the RSI is overbought. But MACD did not have a divergence. That’s why I think this is wave [I] of a major up trend that is coming to an end.

In the attached 60 days chart you will see that MACD has a divergence in the short term that confirms that it should go down in prince to consolidate or to make a correction. Again RSI is way over bought in the short term too.

Applied Materials, Inc. (AMAT)

2009-10-10T10:10:00.000-04:00

This is slow moving stock. It will be in an uptrend very soon. Good time to purchase some stock and hold it. From Feb 20, 2009 to July 30th 2009 the stock was forming Wave (A). Since then it was forming wave (B) down trend. Within the next 2 weeks stock may go down to about $12.50 to complete an ending triangle in Wave (B). After that it will form a 5 wave uptrend to complete wave (C).

Wave (A) move from $8.11 to $14.13, a length of $3.02. So wave C also could go up by $3.00.

To confirm wave (B), MACD was narrowing at 0 line for sometimes. RSI neither over bought or oversold.

Where are we now?

2009-10-09T17:08:00.000-04:00

Amazon (AMZN)

As my initial observation, this stock is in a bullish trend. But I was expecting it to go down before it starts the jump up. It had a 3 wave down turn since September 23rd peek at $94.62. This retracement was close to 38.2%. Therefore I had labelled it as a minor wave A. Initially I thought the bounce back from $88.87 on October 6th was a minor wave B. But this bounce back has 5 waves. This looks like it is the wave (1) of the final five wave motive structure.

So, if you have a bullish trade have a stop loss at $88.27 and keep holding it.

I am attaching a 30minute chart to clarify this.

Coca-Cola (KO)

Coca-Cola (KO) price came down as I expected. But the down turn looks like a 3 wave correction instead of a 5 wave motive structure. So the down turn looks like the 4th wave of the final five wave structure. MACD also has a slight divergence, but if we form another wave up, MACD could confirm our prediction.

In that case, the stock could bounce back to about $56.00 before it breaks down. So if you are bearish as my initial estimates, move the stop loss to around $57.00. On Monday if the stock goes down below $54.50, we are in our down turn.

Anadarko Petroleum Corporation (APC)

As my yesterday’s posting, this stock has come down in price. But the down turn started today at $68.35. This down turn has a 5 wave motive structure. Also this has broken the trend line that started from October 2nd. This trend line that was forming till yesterday has been broken.

So I believe we are in a down turn on this.

Overall Market – Oct-09-2009

2009-10-09T06:21:00.000-04:00

Instead of posting my estimates, I am providing a link to another Elliott Wave trader. Check out the article at:

http://danericselliottwaves.blogspot.com/2009/10/its-going-to-come-unglued.html

Anadarko Petroleum Corporation (APC)

2009-10-08T16:20:00.000-04:00

Anadarko Petroleum Corporation (APC) was short listed a few weeks ago as traders were way too optimistic on this stock. In the 2 year chart, the A-B-C formation of the bullish trend since Oct 10, 2008 has reached closed to a retracement of 78.2%.

Wave 5 wave structure of wave C came close to 78.2% retracement. MACD had a divergence and RSI was in over bought territory.

I am expecting this to be completing a 3-3-5 retracement that started in June-06-2008. The last 5 wave down is what I am expecting it to be forming. This should bring the stock down from $68.00 to $12.00 in the period of about 4 months.

This is an ideal situation for a bearish trade. Have the stop loss at $68.50. The 5th wave that I marked could be the 5th wave of wave 3 insted of wave C. If that is the case, we should see a wave 4 forming. Either way, in the short term the stock should go down.

Coca-Cola Ltd. (KO)

2009-10-07T12:23:00.000-04:00

Coca-Cola (KO) was short listed in my sentiment analysis a few weeks ago as people were overly optimistic. I labelled my wave counts. It was in the process of forming 5 waves. I identified $55.00 to place a bearish trade.

Today KO has hit my target and it is going down. I am targeting a 38.2% retracement at $48.33. These 5 waves could be wave A of a correction or wave 1 of a new trend. At this moment I am not sure what it is.

I have a stop loss if the stock goes over $55.28. I will adjust my stop losses as it progress.

Amazon (AMZN)

2009-10-06T22:25:00.000-04:00

I got interested in analyzing AMZN few weeks ago as it was short listed in my sentiment indicator analysis. Public were overly pessimistic on this stock. From July 23rd, 2009 to Oct 31st 2009, the stock was forming a sideways movement on wave 4. After that it has formed wave (5) of wave [3].

Wave (5) of wave [3] has an extended wave 1 with a gap in wave 3. Because of this we expect the wave [4] to fill the gap in few days.

I am expecting it to go down to the range of $82.50 to $85.00 to complete wave [4] and then form wave [5]. Wave [1] has length of $23.54 ($58.22 - $34.68). So I am expecting it to go up by $23.54 from $82.50 - $85.00 range.

As wave [4] should come in the range of previous 4th wave (which is marked as wave (4)), this stock could go down to $80.00 and then form wave [5] to a target of $103.54 (80 + 23.54).

About this blog

2009-10-06T16:22:00.000-04:00

We are stock and options traders. Mostly we trade in U.S. stock exchanges. We pick our stock to trade based on Elliott Wave principles. We will be posting our analysis on this blog for others to review and make their comments.

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