Today the markets began the year with a bang. The wave structure counts well on the daily and 60 minute charts. W.(2) may have ended right at one of the potential targets (1271.5) that I mentioned for the termination of w.(2) during my 12/27/2010 post. There was a minor decline at the close but we do not have any evidence that this rally has indeed ended. Given this information it is prudent to be cautionary. I've also labeled the chart where w.5 =w.1 at 1291.75. Should the wave structure continue to subdivide, this upside target would certainly be the next level to look at for the termination of w.(2) and a subsequent failure. Tomorrow I'll be looking for the market to prove itself with a follow through day. If this doesn't materialize, I'll be looking at how the market reacts surrounding 1227.5.
I have just made a multiple chart post. You can read it here at : http://elliottwavelive.blogspot.com/2011/01/heard-on-street-weekly-perspective.html
There is little to discuss tonight that adds to my current view that the market will rally to the 1291 area. The price action since 1/3/11 is clearly corrective. However the market on the weekly chart level is OB and 1275 seems to have proven to be formidable resistance. The USD has rallied in five waves from it's low (79.03) established on 12/31/10. The decline in the dollar was expected and given the negative correlation between equities and the Dollar, the stage may be set for further advances in the ES_F. One word of caution. The market has made three distribution days since the beginning of trade in 2011. Distribution occurs when supply (sellers) are outstripping demand ( buyers). I have labeled each distribution day (when trading volume is heavy when price declines or when little upward progress has been made (churn). When distribution occurs, it's a prelude to a drop in price that may come days or even weeks later. Distribution by itself is not a stand alone buy or sell indicator but it is a tool that I use to confirm topping price action. Although the wave count suggests higher prices, the fact remains that this market is way extended and a significant correction is long overdue. Best of Trading
I just posted a mutichart post for the ES_F at http://elliottwavelive.blogspot.com/2011/01/market-pulse_12.html Best of Trading
I just made a multiple chart post on the ES_F market at: http://elliottwavelive.blogspot.com/2011/01/heard-on-street.html Best of Trading
The Market finally cracked or did it? Today's opening gap down was followed by significant selling pressure on heavier volume. While the price action looks impulsive on lower time frames, one day doesn't confirm that a tradable top is in place. For tomorrow I'm anticipating a rally that should not exceed 1295 if w.(2) had indeed ended. After an initial five wave decline, the first rally (a second wave) from the beginning of a directional trend change will fail on what appears to be a strong opening but by the time the market closes it's down for the day on heavy volume. Astute market technicians will not be fooled as volume will contract as wave c completes. Also, on an hourly chart a technician will be able recognize when the rally fades (a completed w.c) and an increase in volume as selling resumes. This will add to the bearish case. If this decline is for real, the near term target is the previous forth wave (1172.25). Best of Trading
I have confirmed a five wave initial decline from 1295 that was followed by a three wave counter trend move that completed at 1288. Regardless of whether you're a bull or bear... according to the rules and guidelines of EWP, at a minimum this market should move to the OP and complete a 5-3-5 patttern. A more bearish view is to target the 1.618 extension is where w.iii = a 1.618 multiple of w.i. Best of Trading
Tonights update will be brief as tomorrow starts the FOMC meeting. Today's advance cau me off guard. In my weekly publication Heard On The Street , I anticipated a further decline today. That's not what happened. Instead the market rallied to a .786 retracement of the decline that began from 1295. If the initial decline is a top, 1295 is the line in the sand that can't be voliated to maintain a bearish view. Based upon the strong close, price may rally in the ON session or earily on tomorrow. If w.(ii) is still unfolding, a common relationship exists where w.c = .618 w.a at 1291.25. Bottom Line: Price must turn tail or the S&P will reach a new recovery high and confirm the Dow's advance. The implications of such would mean that w.(2) was still unfolding. If you have been reading all along, that's why we need confirmation ! Let's see what happens. Best of Trading
The ES-F reached a new recovery high today that effectly removed any bearish bias. It is confirmed the DOW's leadership... a negative sign for the bears. If you are watching price action you know that this market is struggling to stay afloat. The new high means that our next expansion that may be the termination point of w.5 is where w.5 = .618 (w.1-3) at 1306.25. I've also made a slight relabeling of the subdivisions of the most recent advance from w.4 for your review. Developing patience to wait and wait some more for the market to make it abundantly clear when it is time to climb aboard is paramount. Don't jump the gun. While we attempt to label the appropriate substructure as an exercise,... trying to call a top often takes several attempts and is costly to your account and mental attitude. Market manipulators routinely run stops before moving the market the other way. Simply put, IMO, a trader should never trade the the terminus of w.5. Let the market commit to you before you commit your hard earned money to it. Tomorrow is another day. Until I see a completed five waves down, a tradeable top is not in place. Best of Trading
As expected, the S&P completed w.i circle and rallied. I've labeled the substructure for your review. Second waves typically retrace 50%- 62% of the previous wave, with 62% being most common. By looking at the current wave structure, there are a number of possibilities that could be unfolding. I'll have to see more of the wave structure to be certain but I will post an updated chart and discuss the implications thereof. Best of Trading