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Monday, May 10, 2010

Monday updates

After the close, A wild day indeed. It is very frustrating trying to count waves and provide the best possible probabilities when Governments can make $1,000,000,000,000 appear out of thin air, and use it to provide liquidity to the European banks. Market manipulation at its finest. No assets were sold to come up with those funds, only more debt taken on by those participating Countries, that are already heavy in debt. Kicking the can down the road and making the debt problem worse are the only real accomplishment made. These Government interventions at these levels just throw wrenches into Elliott wave counts making them useless at times.
For a Trillion dollars, which, $50 Billion was provided by the United States through the IMF, I figured it would only be appropriate that your money should at least buy the 1-2, 1-2 up wave pattern with the Bullish option on the above chart.
These wild swings in up and down volume ratios over the last week are reminiscent of the last major trend change we saw in March '09 at the bottom. Today we had another day where volume exceeded 90% for one side, the up volume, and last week we had two days of 90+% of down volume. This could be another sign that the large up-trend is in major jeopardy.
The trend remains at neutral until we make a higher high at the 1177 level, or start making lower lows by breaking below 1103.84. The bulls have the 50 day MA to contend with at 1171.62.
Breadth for the day was impressive, to say the least closing at 18.93:1, advancers, on heavy volume. I would like to repeat the same thing I was saying during the sell-off, we need more then just one day of bullish numbers like this, that is, we need follow-through to confirm a bullish, up trend is really in place, and not just a correction of last weeks sell-off.
The bearish count is still alive, although the SPX is fast approaching that magical 62% retracement level were the odds really start declining that a 2nd wave will be the correct way to label this rally that advances from Thursday's low. But there is some positive news for the bears, the small caps are not keeping pace with the larger caps, as the Russell has yet to retrace 50%.
And just to make the bears feel a little better, the Euro got hammered today closing below 1.28, after approaching the 1.31 level in over-night trading against the Dollar.

9:18, The small caps are definitely not participating in this rally as much as the larger caps are, the Russell still has not even reached the 50% retracement level yet, still at only 46.50% retracement. BTW, I do not have a short-term count on the Russell right now that I have high confidence in, there are multiple ways to label it right now, so please take the above count with a grain of salt, as the sell-off could also be counted as a corrective wave down.
* Breadth update, 24.58:1, advancers, but the volume is falling quickly.

Click here for a live, and updated chart!!!
7:28, This is very interesting how the shortest-term Fib fans provided resistance to the rally this morning, stopping it dead in its track, this is something that needs to hold for the bears case.

Click here for a live, and updated chart!!!
7:20, I was able to add a set of bullish fans, but am unsure how they will react, with that spike down Thursday, it really makes it tough to select a set-point. The bearish Fib fans are on their last leg, with only one fan line providing resistance.

Click here for a live, and updated chart!!!
6:51, The IMF to the rescue, to the tune of 1 trillion dollars, nothing like a lot of countries in debt coming together, creating more debt, to help out Greece, which is falling apart because of debt. These Ponzi schemes just keep getting larger.
The gap up open eliminated all but one bearish count, the one count where the spike down was the ending of the 1st wave down, leaving us now in the second wave up. The bullish count also is a very valid count, but we need to make new highs to confirm that, because a second wave can retrace 99% of the 1st wave and still be valid, however, once it reaches the 62% retracement levels, the odds really drop that it is a 2nd wave and the bullish count become the most likely. The bulls also need to deal with the 50 day MA which is at 1171.67 this morning, and should provide resistance. Since we made a new minor higher high, the trend now is neutral, until we make a major higher high, where it will become bullish, or we start making lower lows, and it will be back to the bearish trend.
***Breadth reading are really favoring the bullish count, and are VERY high, at 32:1, advancers!!!!


  1. 2nd waves within impulse waves rarely correct to 62%?

  2. agnes, Once the 62% retracement level is reached, the odds of that wave being a 2nd wave dramatically decrease.

  3. China never moved overnight while all other
    indexes have made huge moves. Am I missing something or isn't China the 800 pound gorilla in the room. It would seem to me that this move up on all continents is a short squeeze and will quickly reverse in the next day or so. Throwing borrowed money at dead money solved "NOTHING" and it only complicates the outcome that much more.
    I think 1155 is the high and we trade lower from here.
    What are your thoughts Michael

  4. Yes, throwing good money after bad is just another nail in the coffin.

    Note, however, that there is still potential for SPX to move to new highs via an ED. The low in Feb was probably the end of a B wave expanded flat. Then we got wave A upwards. The drop recently could easily be a B. That makes A and B of a potential ED. Now in C.

    I don't have much confidence in the ED scenario given the speed of the recent drop, but Gann work does suggest higher levels to come.