Thursday, March 12, 2009

Today was painful, but tomorrow is a new day

Well, so much for the 734 area containing the uptrend. Once the market broke that resistance there was nothing holding it back. All I can say is that we must be very close to our reversal, as we have reached the same overbought status as our previous wave 2s and the next day begun new downtrends. Rallies were generally retraced in 3-4 days, so we could be sitting back at 666 come next Friday. That would be a big welcome to my account ;-). Volume continues to be unimpressive. If the big boys are jumping in it isn't showing up in the volume.

However, the market is in charge, and it first must give us some confirmation that we haven't missed something in the charts. Our first clue will be two consecutive closes below the 8SMA on the 15 min chart. This should instigate a break of the channel. Our second clue will be to take out our previous w4 low at SPX 713. Then comes our key area I talked about before SPX 699 (I was previously using ESH9, but I've moved to the next contract ESM9 and the numbers aren't the same). Any continuation of the recent rally must hold this level on an hourly close.

One thing is clear, however. The move off of our w4 high is a clear 3 wave move. If we some how hold the pullback, then that would make this a much more complex wave structure. I would much rather not go there.


  1. Volume has decreased on each of the last four trading days.

  2. Rich,

    Since we can see 5 clear waves up shouldn't we expect a zig zag?

  3. Edwardo, yes I agree very much that volume has not accompanied price on this rise. Price, however, is king show we'll watch what it does on this next move down.

    Pedram, if this is a flat, then the wave structure should be a 3-3-5. We would have just finished the last leg of this structure with an impulsive wave. Now, if we only get an a-b-c pullback, then we may be in a lot more trouble here as this first wave has already retraced more than 38.2% of our 3rd wave. Another impulsive wave could put us much too high and make things very complicated for us. I think price action at 700 will be key.

  4. Rich...what is have been wrong for about 3 days now..the wave counts are wrong aren't they???? But here is my I mentioned in an earlier post; I am a novice and have been heavily researching the Elliott Wave concept and it seems that all followers believe the internet bubble was Wave III...well maybe not. And maybe wave IV is done and we are heading for a major wave V up to DOW 25,000. It is all interpretive; in other words:Elliott Wave is a purely techinical theory and I believe prices move because they feel like moving not in accordance with any grand economic theory. Sorry, seems to be all BS now. I would not quit your day job if you follow "theories". PS: I played Calls all's your account doing?

  5. kidflare - wow the love I feel from you is too much ;-). First off congrats on doing well over the last few days. Second, if I were right all the time then I would be a billionaire by now.

    Next I would like to say that the channel had to break, it never did. I said it would likely be contained by 734 but there was never an EW requirement that it had too. Picking tops in advance is always a roll of the dice.

    As for dow 25000 - not going to happen. If 2000 was a wave 3 top, then 2007 was the wave 5 top. Do you really think the recession is about over? That all the stats are, so far, worse than everything since the great depression, but we'll be out of this in no time flat because the 'gov't' is going to 'fix' this? Sorry, but history is on my side. Gov't has NEVER fixed anything of this magnitude - EVER.

    Now as for following a theory and quitting my day job? If you haven't noticed, I only use EW to put the price action in context and to look for probable turning points. I also use technical indicators, volume, and support and resistance lines. My question to you is what do you use? If it isn't something then you're just gambling. Gut feeling doesn't work for me and it hasn't worked for anyone who has been successful. Whatever you do follow is a theory. Nothing works 100% of the time, and if yours did you wouldn't be spending your time reading my musings except I guess for good laughs.

    As for my account, well I got greedy and didn't employ my risk management rules. So, I got burned. Currently lost about 90% of my gains that I've been accruing over the last couple of weeks. So one more lesson for me as you always learn most from the lessons that cost you real $$$. But I'm about to get some of those back - if not all of them, so in the end I'll be fine and start working on the NEXT big move.

    Best of luck!