Thursday, February 12, 2009

We continue to build energy for a downside move

You know the drill. Rev the engine with the brake on so you can peel out. Well, that is what the market is doing now. With this kind of build up, when the brake finally comes off it should be 0-60 in about 2 seconds.

I have to admit, I was really disappointed to come home empty handed today. I thought the bull had been stalked well and killed. But I guess by the time I got up to it, the bull had found enough strength to run off. That's okay. Patience is required especially before the terminal moves. The bull is mortally wounded, and it may just fall tomorrow. We'll see what the market shows us tomorrow.

Looking at the market action, this picture came right to mind. The bulls drowning in the ocean of a poor economy and overpriced market. But as they are about to go under they put one last arm up in hopes of a gov't rescue. But no rescue comes, instead they get a tidal wave ;-).

Ok, now for the wave count. The best way of 'counting' the move so far is to label what we just went through as a wave 2 irregular flat. We're coming up on MAJOR resistance and should be stopped again. IF we get above 850 and stay there, THEN I'll be re-evaluating my positions. But not yet, as I don't think we get there.


  1. Rich, I've been suffering here with you the last few weeks. I have my own models I work with (mostly quant-based), and they've been pointing imminent crash for a few weeks now. Short-term, they say we crash tomorrow, or Tuesday at the latest.

    Like you (presumably), I've been waiting...and waiting...and waiting, enduring all the head fakes (two government stick saves/leaks in the last 6 sessions alone), aware that the prize would be worth the long journey.

    Cheers and best wishes to you in the next several sessions of trading. I'm sure they'll be exciting.

  2. gautsid,

    Well, its nice to know that I'm not suffering alone ;-). It would be nice if they leaked this info to me once in awhile but I guess that would be too much to ask. Hopefully this journey will pay off as I'm getting tired of the fight (which btw is the goal isn't it?)

  3. I'm suffering also :). Guys, you you are not alone. Rich i don't understand your count of this mini wave v of i. Where is your micro wave i and ii? I think is more a ending diagonal as you can see on my blog. Your picture of "bull crying for help is delicious. Regards.

  4. My dates may be off by a day or two but I’ve been wondering why nobody seems to see this as a 4th wave correction with Wave 3 ending Nov. 20 2008. Wave A ends Jan. 5 or 6, 2009, wave B ends Feb 12, 2009 and this upward progress is now wave C of the 4th wave. I don’t believe wave 5 has begun yet.

    I’ve become a bit rusty at counting the waves since I have been out of the market for about 20 years and have only occasionally looked at the wave formations with casual observation. But the portions for this being a wave 5, appear to be rushing things. If a channel is drawn from Nov 2007 to now it appears that this would be wave 4 up against the top trend line.

    It seem everyone is counting the Jan 2009 decline as wave 1 of the 5th wave. I’m simply wondering why no one thinks this is still wave 4. Does it break some Elliott rule?

  5. Bob,

    Your question is a valid one and some EWavers might be counting it that way. Here are the reasons why I'm counting wave 4 over:

    #1 we had a clear double zigzag off of the Nov lows
    #2 we broke the lowest low of that zigzag. The best case scenario for the move that broke the lows would for it to be an x wave. My experience is that x waves don't usually take out the lowest low (or highest high) of the first wave structure.
    #3 the move off of the Jan highs counted as an impulse wave. Until that high gets taken out, all other action should be counted as wave2s or subdivisions.

    Now, I continue to provide points where I re-evaluate my count and the market (so far) has stayed below those points. If the market changes its mind, then I will too ;-).