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Friday, July 9, 2010

Friday Updates

After the close, What a pathetic day, filled with small over-lapping waves that barely went anywhere. The one piece of Technical news is that the SPX did close above the 20 day MA which was at 1076.43 at the close. My best guess on the wave structure today is that an Ending Diagonal is playing out for the final "C" wave. I am really getting worried about the size of this retracement as the SPX keeps inching higher towards that 62% level. A 2nd wave retrace is still valid all the way to 99.9% of the start, but after it reaches the 62% level, the odds really start to drop that a 2nd wave is the proper count. The SPX is still making those major divergences on the RSI, and the 5, 35 histogram so hopefully this rally is burnt-out now, and Monday will kick this back into the selling mode, other-wise it will be time to start looking for a bullish count, with the possibility that 1010.91 was a major bottom, and we are in the start of a new bullish trend that could take the SPX to new highs.
Breadth for the day ended at 3.77:1, not quite as high as yesterday, but respectable. Another sign this rally is waning though is the decreasing number of advancing issues, not to mention volume, which is also diminishing.
The trend Trend Finder does remain at 50% bullish, and again today the SPX made no new higher highs, nor lower lows, but did capture that open gap and the 20 day.

This is the longer term daily chart that covers the entire rally, and ever since the start of the rally I have been adding trendlines off of the major lows, it has turned into a very symmetrical chart, and the most interesting part is once a trendline is broken to the downside, the SPX has never been able to recapture that line, support has always turned into resistance, and once again, the SPX is testing resistance from the latest trendline.
FWIW, the SPX has now filled that gap, lets not ruin the winning streak of the above chart.

Click here for a live, and updated chart!!!
7:50, The SPX did make a new high this morning, and is still a couple points shy of getting that gap fill. There are some major divergences building now as the price action is making higher highs, and the indicators are making lower highs, a good example is in the 5, 35 Histogram, where the last three highs have been progressively lower, normally a sign momentum is waning and a trend change is on the horizon.


  1. good analyse, thanks

  2. hi, i like and appreciate your charts. however, you seem to have an unabashed bearish bias that calls into question the objectivity of your approach. when you indicate that we need to break the trendline to keep the same trend going (of always breaking the trendline down) that tells me you favor a bearish scenario and i believe that colors your analysis. you have indicated this numerous times in the past by being disappointed at market rallies and excited about market falls. to me, the whole point of an analysis is to be as objective as possible and to try not to let your own personal preferences bias your outlook.

    just thought i'd share my perspective. i may be wrong but that is how it seems from following your site and postings for the past 6 months or so.

  3. semi, Very tight line to walk, but I do agree with you that personally I do have a bearish bias, and try to compensate for it as much as possible. To me, the whole hope rally was a corrective structure and so I am looking at this as a bear market, and do lean bearish for that reason. I did spend the majority of my investing years doing FA, and not much with the TA, and I have a very hard time wanting to be bullish with the financial mess we are in, and the future does not hold much hope with the sky-rocketing debt of this country. Best case scenario I see is another Japan, stagflation for many years, with close to zero, if any growth.
    But thank-you for leaving your comment, it is something I am glad you did share and is something that is constantly on my mind

  4. Michael, isn't a 61.8% retracement for a wave 2 pretty much normal? I have always thought this is the least we could expect...possibly more.

  5. Once 62% hits, odds go down to somewhere in the neighborhood of 15-20%, that it is a 2nd wave. A normal retrace can be 38-62%, but odds start dropping the further it goes along. Since EW is about probabilities it is something to be aware of. Hope this helps :)

  6. remember december of 2008? ii retraced more then 62% before the meltdown - same will happen now i think. however monday we will go down, then rally for 3 days - and that's will be it

    take care

  7. michael,

    thanks for your openness to my comment. i share your pessimism about the state of things but i have found over the years that my thoughts (positive or negative) and my rational approach to predicting investments are often not productive. in other words, the markets don't necessarily seem to move in the direction that makes sense to me and i continue to search for some objective predictive method. elliot wave seems to be promising but i really like what you do with the fib fans, which seem to do as well or better than anything else at least at showing expected strength and resistance points. thanks for all you great research. i really have learned and you have opened my eyes to evaluative techniques i was unaware of.

  8. I agree with those sentiments. The Fib fans have been very useful and interesting indeed. This blog is the only place I have seen them.

  9. Thank-you for the Fib fan comments, I was starting to wonder if people were seeing the benefit of them, glad you both said something because now I will start posting more of them :)