Week-end Observations

This has been my primary long-term count for the last couple of years that the SPX has been in a long-running correction since 2000, stuff in either the above a-b-c-d-e count, unhealthy or a double-zig-zag, a-b-c-x-a-b-c, both of this counts are classic 4th wave flat sideways corrections. I have taken a beating from the blog-o-sphere because of the labeling of a iii wave at the peak in 2000, mainly because it does not match the mainstream wavers count. I have always said I had very good reasons to believe in the validity of this count, but have been reluctant to give out all the details.

Here are some of the reasons supporting this count that I have never revealed before, the first one, check out the RSI reading on a yearly time frame, it hits its most extreme readings in 2000. this is a very important sign because the RSI always hits its extremes at the top of the iii of 3 wave, not the top of the 3rd wave itself, it normally diverges. Momentum is at it peak and the price action is it’s strongest for the iii of 3rd wave.

Second, that purple trendline that does not seem to connect to much besides the low in 2009, is really a long-term Fib fan line from the 1800’s. The SPX topped in 2000 at its furthest distance above this line AND the low back in 2009 did not break below it, this is very important because a 4th wave should bottom well below the top Fib fan line. On the other hand, a iv wave should not be breaking below the line because it is still in a 3rd wave.

Third, from channel that is made by connecting the lows since 1932, notice how the price action breaks above the upper channel line for the top in 2000, this is more suggestive of a iii of 3 wave, and not the larger degree 3rd wave itself.

But why am I bringing this up now. Because the SPX tested the median channel line, and a trend line that connects some of the highs including the top of wave i in 1937 last month, where is was strongly rejected.  

Here is a shorter-term chart with the same lines drawn as the charts above, what I was trying to see this morning is how the 4th wave short-term count that I have been posting all week and you can see in the chart below would fit into the larger picture, and the median channel line in specific. There seems to be plenty of room on the above chart for this latest wave to play out and still get the 5th in without breaking above this resistance. Any break above this though the bulls have ample room to make new highs with the longer term option 2x zz count, with the SPX currently in the “x” wave.

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10 Responses to Week-end Observations

  1. john staley says:

    99% of elliott wavers are bears and for 2 years have been predicting a sharp reversal that never comes. maybe this isn’t a bear market rally??

    • I cannot speak for all the other EWers’, but for me, yes I do believe that we are in a very long-term correction, but at the same time have been bullish long-term numerous times catching the majority of every rally.

  2. john staley says:

    how can you feel good about high cash level? i’ve been beating myself up for missing out on one of the biggest bull runs for 2 years.

  3. Dennis Dorsett says:

    I find it odd that you do not utilize Fibonacci retracements in you analysis. 1344 basis the S&P 500 ie. , the recent highs was just about a .764 retracement of the peak in the S&P to the lows of 09′. I have been following your blog and yes it “seems impressive”… but if I may say, “what have your returns been ?” Secondly, what is you level of education?
    Dennis R. Dorsett, CFA

    • In my own experience I have not found Fib. retracement levels to be as useful as other methods, such as previous highs and lows, Bollinger bands, MA’s and Fib fans themselves, but I do watch the retracements levels, and post the important ones.
      My personal returns have been good, up close to 200% last year, so far this year I have not traded a whole lot. I am finding it hard to trade AND keep the web-site updated and with the SPX trading sideways have decided to concentrate on the web-site until we have a decent break-out. I also have a small electronic manufacturing business to run and do not need to trade for a living, although I still spend 8-10 hours a day studying the markets.
      My level of education, -degree in Media and TV production, something I never pursued. I have been investing in the markets since the early 80’s.
      * I am personal am enjoying the time I have been in cash, it has really reduced my stress level and allowed me to concentrate more on the markets and do believe it has made my analysis less biased.

  4. KaZoom says:

    Nice analysis Col! Thanks for sharing!

  5. Jesse says:

    Why is e truncated? if you project a to c, shouldnt e hit somewhere on that line?

    • Jesse, it is a pattern I have seen play out before in many different 4th waves, at first it looks like an expanding triangle, then the d and e wave contract, think of it as a diamond. But I am open to this current d wave making a new high IF it breaks above the median channel line, in an expanding triangle.

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