November 30th Update

S&P 500

Today's impressive rally has confirmed my alternate count in my prior post.  I think a year end rally leading into the new year is pretty much in the bag at this point.
















My daily wave count in my previous post had some problems.  I was expecting another push lower before turning up.  I think I've determined where my count was wrong.

I had a 1-2, 1-2 count in my prior post, which was obviously just a triangle in an A-B-C move lower to complete (X) on the weekly chart above.

Summary:  The market is going to stay bullish for the next 4-6 weeks, but should not exceed the May 2011 highs.  The larger degree trend is still down I'm afraid.

Silver

Silver could be ready to plummet.  On the daily chart below we appear ready to begin minute wave ((v)) of minor wave 3.  Given all the stored up sideways action going back to September, this should be like a stretched rubber band being released.

November 28th Update

S&P500

Today finished with a strong rally off of a down week last week.  We started the day up over 40 points, and ended up around 2.9% at the close.


We're closing in on year-end and it's been a while since I've really looked at bigger picture, so lets look at Weekly and Daily charts of the SPY.

Starting from the May highs of 137.18 on the SPY we see a clear five wave decline which I have highlighted in red.  This is a weekly chart, so in Elliott terms that means the larger degree trend is now down.  At the low, I've pointed out that the market was down 21.6% at that point.  We then saw a very sharp rebound extending into October 24th.  Following that sharp rally, we sold off again, but failed to make new lows last week, and we're beginning to bounce again.
To summarize, we know we have five waves down on the weekly chart, but the waves that follow are not very clear.  Let's look at the daily chart, and come back to the weekly and look at possible counts.

We are now just looking at the rally off the October 3rd low of 107.43.  The sharp rally we discussed above appears to break down into three waves, of which the third wave is a diagonal triangle (not really shown, but if you zoom in you can see it).  That makes this an A-B-C zigzag retracement.  Strictly speaking, this could be all that is needed before the next leg down resumes.  Corrections can be complex, as well, however, and this could also easily turn into a combination.
Following the October 24th high, we have a wave down which could be either a first wave of an impulse or an A-Wave, followed by three waves (blue lines) which appears to be an impulse wave in-progress.
So regardless of the outcome on the weekly, we still need to finish the impulse wave down on the daily if this is an A-B-C.  That means short term, we need to break last week's lows.

The bottom line:  If the October 3rd low stays in tact, then odds favor a complex (2) up extending into the beginning of next year.  If the October low is exceeded to the downside on high volume, then we will definitely be in the next leg down of the decline which will be a third of a third, and will do a bunch of damage to equities.

Going back to the weekly chart above, I've drawn out some scenarios.

1. A complex (2) which will be W-X-Y in composition.  Another way to state this is A-B-C-X-A-B-C, where we already have the first three wave A-B-C up, followed by a three wave decline in progress forming the X.  In this scenario, we finish X to the downside, and rally up into another A-B-C to complete Y and hence (2) early next year.
2. We are already carving out the beginnings of 1 of (3) down.  The fact that we have not made new lows yet would mean this is an extended third wave which is typically the case in an impulse wave anyway.  In this scenario, we are in the third wave of an impulse, ie ((iii)) of 1 of (3) down.  I threw the 1 tentatively out there in my weekly chart, but realistically, odds are it will break the October lows when it finishes.

Final word:

You can skip all the Elliott Wave mumbo jumbo and just look at what the Ichimoku trending indicator is telling you on the weekly chart.  The signal cross happened back on July 11th, warning that the market trend was changing.  Price broke below the cloud the first week of August confirming the downtrend, and all rally attempts since then have failed to penetrate upper cloud resistance.   In fact the green signal line remains well below the red base line and the lagging line remains below price.  In other words, this is saying the trend remains down.

 Silver

I suppose I should talk about silver since I have an active short position.  The fact is, it's a total mess, and has been hard to follow intra-day.  I'll show you why that is in a bit.

Let's start with the daily chart though.

Coming off the September 26th low of 26.13 on the silver futures, we had a very drawn out, but simple A-B-C correction.   The C-Wave ended up being a diagonal triangle.  The termination of the triangle occurred on November 8th with a high that day of 35.35. Following that was an apparent three wave decline.  What remains to be seen is whether the decline turns into a full five wave decline, as I suspect it will. 

Now lets look at an hourly chart to see the three wave decline in more detail, and what follows.  You can see the third wave down the decline subdivides into a wave with its own third wave extension (blue).  Following the September 26th low, all we have are three wave corrective moves in both directions, and they do not form any sort of triangle.  The only conclusion I can draw at this point is a complex W-X-Y formation, which could be a fourth wave on the daily chart.   Furthermore, the X is its own complex ((w))-((x))-((y)) formation.  Y can end here, but if it does, it will end well short of W.  A very real possibility is that Y becomes complex allowing one more push higher slightly at or above W.

The hourly chart is truly difficult analysis, and may be way off mark.  Sometimes when it's this ugly, you can just stay on the higher time frame and wait for the next wave to start.


Crude

I realized that I haven't posted on crude since November 14th.  I did a short term forecast on Friday that I forgot to post, but I'll show it now in hindsight.  I don't have any current positions in crude, as I'm still in wait and see mode.
In the 4H chart below on the crude futures, there is an (a) wave down followed by an a-b-c expanded flat correction (see my Education page) for (b), where b of (b) is a triangle.  I projected c of (b)'s termination by projecting a fibonacci extension of wave a from the termination of b.  In other words, wave-C often relates to wave-A by a fibonacci relationship.   In this case I used the 161.8% and 261.8% projections, since c was coming from such a low level.  In an A-B-C formation, C normally terminates at or beyond A.  This is a guideline, but one that is satisfied much more often than not.
Notice how price reversed off the 261.8% level almost to the tick!

We need to complete (c) down, which I believe is in progress.  A completed five waves down on the 4H chart will be the likely termination point for a fourth wave on the daily time frame.

November 23rd Update

S&P 500

The market continues to make lower lows. 
My indicator is indicating a divergence with price.   It has a volume component, however, so I wonder if it's just a virtue of the light holiday trading.

In any case, I've decided to play safe and go flat as of yesterday, in case we get a bounce next week.

I've discovered another indicator that I like which moves very similar to mine, which is the RMI or relative momentum index.   It is based on Wilder's RSI, but adds a momentum component.  I believe momentum is key.  The indicator by default oscillates between 30 and 70 for overbought and oversold.  I've always thought such thresholds were arbitrary  and seldom reliable.   I do like looking for divergences with price, however, and whether it is holding above or below 50, which is the midpoint.  I've modified RMI on my platform to show only the 50 line, and use 12 periods for momentum and 26 for look-back.   The defaults on my platform are 5 and 20.  You can see how similarly it moves to my wave momentum indicator, despite differences in how they are calculated.

November 21st Update

S&P 500

Prices are down sharply to start this shortened holiday week, and I'm fascinated by all the (anecdotal) talk I'm hearing from professional traders about non-confirmation in the VIX, lower volume, etc.  Prices can move just as much, if not more, on thin trading volume.  Additionally, it can become a self-fulfilling prophecy that when volume actually does come back into the market in a big way, psychology ensures that the selling continues as traders and investors react to broken support levels, etc.

Even leaving Elliott Wave analysis aside for the moment, when I look at a 4H chart of the SPY ETF, all I need to do is look at my momentum indicator which continues to make lower lows.
I also interpret ichimoku trending indicator which has all convergent signals pointing lower.  There is not one bullish divergence anywhere in the indicator.  Essentially, the interpretation is to stay short which is exactly what I intend to do.

• The signal line is well below the base line and expanding.
• Price is below the cloud and both moving averages, and continues to increase the gap.
• The lagging line is below price
• The forward looking cloud is red and falling

2:30pm update

The market is starting to rebound, but I don't see a bottom in sight yet.  We could trade up as high as 121 on the SPY or about 1208 on the /ES, but that should be about the limit.

November 18th Update

S&P 500

Not a triangle!

Whenever my count is wrong, like above, the first thing I do is delete all the labels and go back to the higher time frame and re-evaluate.

With price heading lower on strong momentum, what we probably had was a 1-2,1-2 situation, or in other words, the beginning of an extended third wave pointing down.  I had optimistically hoped for a rally into year end but I think that's looking pretty unlikely now.

I may update this post later today as things develop.  I should note that I got short this morning about an hour ago, so I'll update my positions page.

November 16th Update

S&P 500

The market still appears to be on track to meet up with the lower boundary of the triangle.  Despite the newsworthy bullish reversal intra-day, it simply looks like it could be a second of five waves down to complete the final leg of the double zigzag formation terminating subminuette wave e.   Said another way, starting from the termination of d we'll have (a-b-c)-X-(a-b-c) down more correctly labeled as a W-X-Y combination.  I expect the final Y wave to clearly subdivide into five waves similar to what I've drawn.

November 15th Update

S&P

Triangle completed?  Maybe not...
We have a completed zigzag, but it fell well short of the lower boundary of the triangle.  I'd like to see another push down to complete subminuette degree wave e.  We got an end of day rally, so the two possibilities for tomorrow's session is a continuation of the rally, exceeding wave d high, or another zigzag lower, creating a zigzag combination for wave e.  The implications of the former are that the rally into year end is now underway.

November 14th Update

E-Mini's potentially appear to be tracing out a triangle pattern.   A triangle always precedes the final move of one higher degree, meaning we should get another push higher soon.  Short term, we are heading lower.  The subminuette degree wave c should not be exceeded to the downside for this wave pattern to be correct.  A final A-B-C move down will likely complete wave e, unless it extends.  If it does extend, this is still a contracting triangle, so the result will be net sideways.
I should note that one of the things that bugs me about my labeling is the fact that my subminuette degree wave a is truncated.

As an aside, for you Ellioticians out there, notice all the signs of alternation in this triangle.  Each leg of a triangle is composed of an A-B-C or an A-B-C combination.  Notice how sometimes the A-Wave is a larger structure with clear five wave subdivisions, as in the case of subminuette degree wave a above,  and other times it's the C-Wave, as in the case of subminuette degree wave d.  Also notice how subminuette degree wave b differs from the others by extending into a zigzag combination, and additionally how the A-Wave of the 2nd zigzag in the combination is a leading diagonal.
This structure is a beautiful contracting triangle if it plays out, and I plan to include this on my education page, since I think it adds some valuable nuances to what is actually covered in Frost and Prechter's book.

In summary, let's watch this move lower closely, and see if it stalls at the lower trend line.

Update: 10:18am

Crude futures: /CL

Crude just completed a five wave move, intra-day.  A 4H chart is shown below. 

Looking at a bigger picture daily chart, we can see that the move up from 10/4 lows is three waves.  Either the move stops here, in which case it's an A-B-C retracement, or we head up once again to complete five waves. 

My bet is that after a small correction we head up for one more move higher, completing five waves.  See below for Weekly and Daily charts side-by-side.  On the left I show a weekly view.  The count I show below is now the only count that makes sense to me.  The second wave down (the wave following B) is the shortest wave, so it has to be a first wave.   The recent rally/retracement off of the 10/3 lows is too strong to be anything but a higher degree retracement of the entire down move (or a new bull market, but I put the odds of that somewhere near zero).   The conclusion that leaves us with is an A-B-C down move where the wave ((v)) of C is truncated (see the right picture for the final fifth wave down).  The fact that C ended on 9/19 prior the the actual low also implies that the next two waves shown in red on the right are A and B of an expanded flat.
So to summarize, we had an A-B-C down, followed by an A-B (making a new low) and three of five waves of C up which will eventually retrace most of the move down going back to May 2.  This entire formation going back to May 2 appears to be the early stages of a diagonal pattern moving downward.
If all this is correct, we should get some selling from here, terminating somewhere in the area of the fourth wave of one lower degree, or around 89.19 area.  Following that, we should head back up one final time to complete a five wave move.  Ultimately, I am targeting 100.65 for the top in crude, which is the 61.8% retracement of the whole A-B-C move down, and high of wave ((ii)) (not labeled) of C down.

November 10th Update

E-Mini S&P Futures

When 1213 was taken out on the E-Mini's, the triangle formation was invalidated.  The move from 1208 on 11/1 to 1273 on 11/8 was therefore just an A-B-C correction of the last move down from the high on 10/27.

Yesterday's low completed a new five wave move down intra-day, which means we are ready to make new lows.  I will be looking to get short sometime Friday with a stop at the 11/8 highs. 

1248 and 1262 in the /ES are both good targets, which are both where A will have a fibonacci relationship to C.  1262 is the preferred target however, since it is also the 78.6% of the move down from 1275 on 11/8.  It is quite likely it will not reach that target by the end of the trading day tomorrow, at which point I will have to decide if it's worth getting in early.

November 8th Update

Grinding higher, but rally coming to an end.

This rally coming off the November 1 low has been nothing short of spectacular.  It's still a second wave, however in my estimation, which means there should not be new highs. Additionally, the October 27th high was just the end of a retracement of the move down from the May 2nd high.  And finally, the May 2nd high was just the end of a retracement of the scary bear market that started in October of 2007.

What all this means is that we are still in a secular bear market, and the last vestiges of hope are about to be extinguished as the short term bullish bear market rally exhausts itself, and the downtrend resumes.

The "when" is always the tricky part, but it could be as soon as November 11th.

Below is a 4H chart showing a completing ending diagonal formation. We are currently in the third wave of five in the formation.

My ultimate target, assuming the third wave ends here, is 1281 on the E-Mini's.