Wednesday, February 25, 2009

Still In The Downtrend

There's little to add tonight as it appears that the markets have been moving sideways in preparation for the next move down. The wave count for the Qs is most probably wave 2 of (5) as it is lagging the other indexes in completing wave (5) down. While the Dow and S&P completed an upward abc correction today and could be in wave ii or iv of 3 of (5). While I have tried to analyze and address the wave count during this sideways movement in preparation for the completion of primary wave 1 down, I am not trading the elliot wave count per se. Rather I am using it as a guide to aid when to begin taking profits. My entries have been based almost entirely on price rules that have been discussed in prior posts. However, it is not prudent to wait for price rule exits when short near a potentially major bottom. I will be looking to begin taking profits as early as Friday on some positions depending on whether we get another move down this week.

I have seen some speculation that we are only completing wave (3) and one can certainly make a case for it if looking solely at Elliott wave. However, in considering the wave counts I take into consideration the point in the 10 month and 4 year cycle that we are in. Carl Swenlin at Decisionpoint called the November bottom the bottom of the 9 month cycle (what I call the 10 month, because that is what it averages out to) and I agree with him. This explains why the current 5th wave has been muted to some degree and the lower potential targets are not likely to be seen for now. We are in the strongest first half of the 10 month cycle. When the 22 week cycle bottoms in March, we should see a strong surge for the first half of the next 22 week cycle like we saw off of the November low. Which should put us at the front end of another 10 month cycle. In other words, we could see a substantial period of market advance prior to the next leg down in primary wave 3. This doesn't mesh, as I see it now, with this next move being wave (4). I could be wrong, but I envision primary wave 3 occuring when the second half of the next 10 month cycle is in alignment with the final descent of the 4 year cycle to bottom in 2010.

We shall see.

1 comment:

dave said...

This morning i looked at a chart for E-MINI S&P 500 (instead of cash) & could see a flawed case for a minute 2.

early January as the beginning of minor 5 of intermediate (3) for SPX
1/21 - minute 1
2/9 - a wave
2/23 - b wave
Presently in c wave ending minute 2 of minor 5 of intermediate (3)

That is a much more bearish wave count. The problem with that is 2/23 seemed very impulsive with SPX down 6 days in a row. We would need to have a consolidation similar to 1/21 thru 2/9 in time to what was the a wave of minute 2.

This also reflects an essential weakness of Elliott Wave. One count is of a mkt's downside move winding down (maturing) versus one where forces are gathering to make a big downside assult. Talk about the proverbial train vs light at the end of the tunnel. LOL