Saturday, September 4, 2010

Wave [e] Approaching Resistance

Elliott Wave International is having another free week. Check out the Asian Short Term Update. The Australia ASX is shown with the exact same wave count as shown above for the Qs. I am pleased that someone is seeing what I've been seeing. Chris Carolan points out that triangles can breakout either way and that's something we will have to be on guard for, but I think it will not be that hard to figure out. Assuming that the August 9 high is not exceeded next week, if we do not see an impulse down from the wave [e] high that breaks the wave [d] low, preferably before the end of September, then we would conclude that either wave [X] is complete and wave [Y] up is beginning, or another leg up in wave B is in progress in a large flat correction that will require another leg down in wave C early in 2011. (That was a mouth full.)

Until proven otherwise, however, we should assume the bearish case. For all the talk of bearish sentiment in the media, the bearish sentiment just isn't that extreme by many measures. On the other hand, wave [e] up is doing a great job or restoring bullish sentiment just in time for wave C down. The Trin has closed below 0.5 for the last 3 days. Two more days of that should just about do it.

Again, I want to repeat what I have said in several earlier posts. If we get confirmation of the triangle above in the next week or two, we can start getting prepared for another multi-month rally. This rally should be the last really good opportunity for the bulls for the next 4 to 6 years as the market will be working it's way back down to the 2009 low. There are several legitimate ways it can get there. The most likely being a long drawn out double zigzag. The least likely being a 5 wave impulse. The most bullish would be a long frustratingly drawn out triangle. As frustrating as this summer's triangle has been, imagine a triangle two orders of magnitude larger zigging and zagging month after month. I don't even want to think about it.

It looks like we are about to get some resolution next week as the Qs approach the January high for the 3rd this summer and trendline resistance. Whatever happens it will help us trade the rest of the year. I was stopped out of my short position this week using the Weekly Daily strategy as the Qs moved strongly above last week's high. I will be looking to go short against the August 9 high in wave [e] next week and I will add to the position on a break of the 9/1 low and last week's low.

Enjoy your Labor Day weekend.

No comments: