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Saturday, August 7, 2010

Week-end Observations

I cleaned up some of the labels on this chart that I have been posting for the last 2-3 days, and added them into a new chart below to simplify things.

This is another way this rally can be labeled from the low at 1010.91 made back in the beginning of July, an A-B-C, with the final "C" wave as an Ending Diagonal which in all cases are found at the termination points of larger patterns, indicating exhaustion of the larger movement. Having an Ending Diagonal in the "C" wave is a semi-rare event, but is perfectly valid under Elliott wave terms.
In order for this count to stay valid the 5th wave MUST be shorter then the 3rd wave, and in this case, anything over 1146.45 would invalidate this count. The final 5th wave should break above the trendline creating a trap for the bulls, then reverse hard into a strong impulsive sell-off.
The percent of stocks above their 50 day moving average on the SPX continue to grow and now are up to 71%. Tops and bottoms of trends are normally found when this number starts to get extreme in the 90+% range (or less then 10%, on the downside), then reverses. Right now the SPX still has room to run higher. I like to use that 20 day MA (blue line) over-laid on this chart to show when the price action starts to wane, and so far it is still fair sailing for the bulls, a cross-over of the blue line would signal trouble for the bulls, and a reversal of that blue line normally confirms that a new trend has started.

This is a chart of the number of advancing issues, minus the number that are declining on the NYSE, or more commonly referred to as a Breadth chart. This is really showing a great example of how the number of declining issues have been deteriorating over the last six weeks as this rally as progressed higher. On the advancing side, things have also started to wane since the high reading back on July 22nd signaling weakening momentum for the bulls as well.

4 comments:

  1. hey man... cant be 1-2... 1-2... 1-2... all the retraces are bigger than previous... the other count is possible....

    possible too is A-B.. and C down (in this case tops is in and that no one expects)....

    cheers

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  2. Creepy, I semi-agree, longer in time, but not price

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  3. i mean (2) > II in price too...

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  4. Shouldn't the max level for the 5th wave of en ed is wave c of a zz from the july low be 1147.91, as calculated here:

    http://gi61et.blogspot.com/2010/08/2149-bst-spx-update.html

    3rd wave = 1088.01 to 1128.75 = 40.74 points. Start of 5th wave is 1107.17, plus 40.74 = 1147.91?

    May not be worth mentioning since the difference is so small, but I'm just trying to get to grips with EW. Since it says in an ed like the one shown all waves must be zig zags, wave 3 must have ended at 1128.75, otherwise, wave 4 wouldn't be a zz.

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