The market failed to complete a 5 wave rise from mid-week's lows and instead actually declined in 5 waves Friday. This behavior, along with it breaking below my key level of 1193 make me conclude that the trend is now down in the stock market. As you may recall, earlier this week I had a "flat" correction labeled with the first 5 wave decline (wave (i) or A) being wave C. This is because prior to that there is a 3 wave rise to a new high. A 3 wave rise to a new high and then decline in 5 waves is indicative of a flat correction. However I did label a very far fetched, yet plausible, alternate count for the 3 wave rise which would have it forming a major top (click here for chart from last Tuesday, or click here for full post from that day). As ugly and unlikely as this count seemed, it may hold true since we now have 2 impulsive declines sandwiching a non-impulsive rally. This is bearish. The million dollar question is, "at what degree is this top?" Too tough to tell at this point, but I did say a few times a couple weeks ago that I did feel that too many elliott wavers and analysts were calling for this monster crash that Prechter has been leading the charge for. And that the sell off of the century most likely wouldn't occur right when everyone expected it, right on time, and right on track with the short term wave count. I said it will do something to fool us, or have us give up. Well I know for a fact at this point a lot of extremely bearish people have given up on this most recent rally, and that the 3 wave rise to a new high and now two 5 wave declines is not textbook EWP at all. Could this be what I was saying about "fooling us"? We'll see. What does seem more certain though is that we have much lower levels to obtain before a bottom might be in place. If this is not the big wave [3] or C, then it's at least a moderately large A-B-C decline, which would have us finishing up wave i of C right now. If so, wave C should carry down to around 1155-1170, an area of prior congestion. If the market relentlessly continues to sell off right through this target area, and rallies continue to unfold in 3 wave moves, I'll then look to set targets that will help us determine if the current decline is in fact the big wave [3] or C.
NASDAQ 100 HEAD AND SHOULDERS
The Nasdaq 100 continues to fulfill the then speculative head and shoulders top I projected on Wednesday (click here for Wednesday's chart, or click here for that day's entire post). In addition to this, both of the Nasdaqs had their lowest daily close since April 12th, suggesting that the uptrend has halted, and the bears are now in control. The evidence is strong that continued selling throughout the overall market should resume in the coming days, if not weeks. The degree of that downtrend will be determined once the structure unfolds.
PLEASE NOTE: THIS IS JUST AN ANALYSIS BLOG AND IN NO WAY GUARANTEES OR IMPLIES ANY PROFIT OR GAIN. THE DATA HERE IS MERELY AN EXPRESSED OPINION. TRADE AT YOUR OWN RISK.
4 comments:
Hello Todd
Thanks for the comments. This is a good risk/reward scenario. If you're looking for fundamentals, here is a good research site re consumer spending. Site shows negative year over year spending, take a look. www.consumerindexes.com
Cool thanks!
Hey Todd, thanks for the great analysis as always!
From a social mood perspective, I think it would be ideal if we are now in the beginning of a B wave down to the mid-1100's (or near the very end of an A wave before starting such a B wave), with slightly higher highs afterwards.
I bet this would remove most bulls' last lingering doubts about the rally. The B wave would spook them, but then the C wave to a new high would convince them that even 'Sell in May' has been conquered and nothing can stop the rally now.
Yeah I agree that's a high probability that social mood needs another push in the market higher. It's gone so far though I'd like to see a slight new high and perhaps some intermarket divergences occur. And the "big decline" should either be so fast that people can't get out of the way, or so slow and tidious that it just slow-bleeds the market for months.
Regards,
Todd
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