Balk

The balk is an illegal movement by the diver defined as:

A false start in which a diver makes an obvious attempt to start the forward or back approach but does not complete the dive;

As pointed out in yesterday's charts, the market is straddling along support. Much as the diver above is in preparation to initiating her dive, it appears that the market today was tantalizing us with preparation, misdirection and indecision.

This is most clearly shown on a close up of an intraday chart. Look how on the 15 minute chart prices keep moving below and then back above the upward sloping support line that forms the bottom of our wedge from last November:

From late Tuesday afternoon, through all day Wednesday, the market has appeared non-committal, yet it appears to be building momentum for it's next move.

Here is how it looks on the 60 minute chart:

The drop we expected to come today seems to be still in the making. We can see prices bouncing off the springboard, the ledge, support, time and time again. I count four touches of support since late Tuesday.

For perspective, the 120 minute chart:



The big picture EW count remains unchanged. Here is a current Weekly chart:


There is no guarantee the market is going to dive off of that board. If certainty was attainable in the markets, someone would have let that cat out of the bag by now.


Well, notwithstanding delusional idiots, all we have are the probabilities and so far they are saying this sucker is about ready to hit the water.

A

On a ledge

The markets closed Tuesday on a ledge over an abyss of significant new lows. Let's take a look at the charts we have been following for the past ten days.

First the 60 minute chart of the SPX. On the right is our trusty wedge containing prices since the beginning of 2009. Today prices fell right to the bottom trend line of the wedge, while the FBS oscillator fell all the way to oversold from overbought. Normally, this stochastic indicator would be signaling some kind of bounce from current levels. But it is perilously close to declaring this a "False" stochastic signal by recognizing a down trend, thus negating any strength.




On the left chart are my trend-bias signals that alert me to short-term changes in trend. We haven't talked about these indicators yet, but I expect to post more about them in the near future. Note how well those trend signals followed the market both up and down. Powerful stuff.

Next, our Weekly chart of the SPX:


Again, prices are resting right on the bottom ledge of support. Will they fall off the ledge, or bounce back to the top support line from last October? The EW software says no bounce, or if there is one, it will be of little consequence and new lows below 750 are on their way.

Let's zoom in on prices and look at the 15 minute chart:


Thw horizontal black line on the right chart is our, "ledge," it is the bottom support line of the wedge from the Weekly and 60 minute charts. You can see a violation of the support line over the last six 15-minute bars. Conclusive?

Here's another close up of the same chart:


What we see here is a clear violation of that ledge, a FBS signaling a down-trend and although not shown, the software is projecting a Wave 5 SPX low under 750.

The weight of the evidence is that Wave 4 has ended and Wave 5 has begun it's descent to new 52 week lows and beyond. The forecast is that at a minimum, 750 basis the SPX will be breached and that lower targets under 700 are possible.

A

Tuesday - Intraday update

Here is a quick snapshot of my internal chart set-ups that I use for my short-term trading. The chart on the right is the 120 minute SPX chart that shows where prices are in relation to the wedge we have been following:


As you can see, prices have not yet breached the bottom of the wedge, but are edging very close to doing so. If wedge is broken to the downside, expect an acceleration of today's decline.

A

It's the same old song

Here is a 60 minute chart of the SPX:


Note:

(1) Triangle-Wedge from the November lows still containing prices;

(2) Wave count still suggesting a Wave 5 down to new lows is pending;

(3) FBS oscillator has turned down from way overbought, just ready to move below signal line.

Tuesday is a big news day and while news may trump EW pattern momentarily, ultimately EW will re-assert itself and direct prices wherever pattern demands prices go.


NNVC- update

Big news from NNVC today:

NanoViricides, Inc. Update on Eye Drug Development
Monday February 9, 7:00 am ET

WEST HAVEN, Conn.--(BUSINESS WIRE)--NanoViricides, Inc. (OTC BB: NNVC.OB) (the "Company"), reported today that on-going negotiations with a large pharmaceutical company have now progressed to an advanced stage. The pharmaceutical company initially plans to evaluate NanoViricides’s drug candidate for effectiveness against external ophthalmic diseases caused by two different virus types, namely herpes simplex virus (HSV) and adenovirus. These evaluations will be performed by an independent research institute that specializes in diseases of the eye.


In addition to a Market Club Trade Triangle BUY on the Daily Chart, my EW chart above is suggesting an initial move to $0.95-1.00 based on today's rally.

A

On being prepared

Before I address what lays ahead for the market, it has come to my attention that some of you just don't get it:

Anonymous said... Hah! You're EW theory just got fu*ked. See??? News trumps all!!!

First, profanity is out of place on my blog and I will not tolerate it. If I have to go back to moderating comments, so be it. Second, one rally is inconsequential to the Elliott Wave Principle and even less meaningful to my analysis. Let's review.

Here in relevant part is my analysis from last week:

Monday, February 2nd:

Once the counter-trend rally is complete, we should see another sharp decline to well below 825.

Tuesday February 3rd:

As Dylan so eloquently put's it, "It's not dark yet, but it's getting there."

Wednesday February 4th:

Watch the 812 level on the SPX, it represents the previous low, if it gets taken out with conviction, the floodgates should open to the downside.

Thursday February 5th:

The significance here is that a break of the wedge to the downside should lead to another fast 100+ point decline. It can happen at any time, tomorrow, next Monday, a week from next Monday. Until it happens, prices can play all they want inside the wedge.

The common thread, which is unchanged, is that the market continues to flirt with major support and it is when that support fails that a vicious third wave decline will take hold.

Here is the wedge I posted on Thursday night, ahead of Friday's rally:


My observation was that it will take a break down out of that wedge to trigger a significant decline. Now let's look at the same chart, adding in Friday's rally:




See the difference? Hardly. Friday's rally is a mere blip, an elongation of last week's candle that isn't even threatening the top resistance line of the wedge. My analysis is unchanged, when and if the wedge is broken to the downside, expect a massive decline, a mini-crash, or worse.

Here is a closer view of the wedge, basis the 120 minute chart:


Take a look at the False Bar Stochastic indicator at the bottom of the chart. It has again reached the Overbought top area of the scale. The previous time it did this the market suffered a significant decline the following day. It is again poised to signal a move lower.

In summary and as I wrote on Thursday night, prices can play around inside the wedge long enough to shed bull and bear alike, before making a definitive move out. My analysis is steadfast that this definitive move will be to the downside. Only an impulsive move above the top of the wedge, well above the 900 level on the SPX, will call this analysis into question.

Finally, I don't mean to merely chastise a flippant comment made in response to one of my posts. Instead, I want to point out how important it is to keep the bigger picture in mind. We are waiting for prices to signal that a significant move lower is imminent. As markets do, this one is teasing it's participants with fake-outs to the downside, followed by fake-outs to the upside. There is a real move coming and to be aware of the big picture, alert to the wedge forming on the weekly chart, is to be prepared for whatever comes our way.

A

GFRE - update

GFRE is up 30% today on news that it has agreed to exchange newly issued stock to reduce debt. The significance is that the exchange is valuing GFRE shares at about $1.00 per share: 21 million shares to reduce $21.3 million in debt.

GFRE is currently trading at $0.39 per share.

What do the creditors of GFRE know that the marketplace doesn't?








A

Geometry of forecasting

Here is an updated Weekly chart of the SPX, through Thursday's close:


There are two wedges drawn on the chart. The first wedge was broken to the downside three weeks ago. That break led to a drop of close to 100 points on the SPX. Prices have been flirting with the second wedge this week, just barely touching the bottom trend line Wednesday and bouncing weakly off of it Thursday. Meanwhile, the False Bar Stochastic oscillator is signaling that down-trend is in place.

The significance here is that a break of the wedge to the downside should lead to another fast 100+ point decline. It can happen at any time, tomorrow, next Monday, a week from next Monday. Until it happens, prices can play all they want inside the wedge. Frustrating if you are short, but as we saw three weeks ago, patience now will be well rewarded upon the break.

Question of the Day

Dave said...
Allan:
Since I discovered your blog almost a year ago, I have been awestruck by your accuracy and refreshed by your candor. I also know that you would be the first to say that if you were right only half of the time that you would still be ahead. That said, is it possible that the EW model has no way of factoring-in the extreme differences in today's scenario? Is it possible for the herd to behave in an unpredictable manner this time? Wondering minds and all that...
Respectfully,
Dave

Where I suppose it is possible, it is not very likely. More probable is that I screwed up the application of theory to facts, thus arrived at an incorrect conclusion. That said, even that is not very probable since the two eminent EW authorities, Glenn Neely and Robert Prechter are in agreement with me that we are going lower, a lot lower.

A

Begin the Beguine

Here is an updated 60-minute chart of the SPX, showing an ending corrective wave right at the 61.8% retracement level of the previous decline. Cole Porter notwithstanding, it appears that another severe decline has begun.

Watch the 812 level on the SPX, it represents the previous low, if it gets taken out with conviction, the floodgates should open to the downside.


A

Peaking

As the following chart indicates, the market peaked today right between Fibonacci 38% and 50% levels. It can go higher and reverse, or it can simply reverse at the Open on Wednesday and never look back:


Adding to the argument for an imminent reversal is the False Bar Stochastic indicator along the bottom of the chart. It has risen along with prices from Oversold at the recent lows and is now entering the Overbought area. A cross-over and reversal down in this indicator should be confirmation that the next wave down has begun. Another way of looking at this (if you don't have a stochastic indicator in your pocket) is that any serious weakness tomorrow will trigger a Stochastic Sell Signal.

Below is a Market Club Trade Triangle chart of the same S&P index:


Note how well the Weekly Sell Signals fared in the this Triangle Trading chart. The September 4, 2008 Sell Signal generated a gain of 365 points, or about 30%. The most recent Sell triggered on January 14, 2009 at 857. A similar 30% gain will take the index all the way down to the 610 area on the S&P, near the bottom of the range targeted by the Elliott Wave analysis.

There are no sure things in trading market indexes. But there are Wave 3 declines which are characterized by violent, demoralizing, blood red market conditions. If you nail the right side of one of these suckers, you can profit handsomely. That's why we're here and that's what is so exciting about the current analysis.

As Dylan so eloquently put's it, "It's not dark yet, but it's getting there."


A




Rally time?

The market could rally tomorrow, emphasis on the could, but it is doubtful that it will amount to much before turning lower, much lower.

S&P Sixty-minute chart

This 60-minute chart of the SPX shows a clear five-wave pattern lower, which is probably just a part of an initial down wave that ultimately will carry the market to new 52 week lows. I placed some horizontal lines on this chart that represent Fibonacci retracements of the entire move down from January 28th, following the completion of circled Wave 4. The SPX low print Monday was 812.87, which is down from 877.86, the Wave 4 High. That decline should now see a counter-trend rally of between 38 - 62%. The most likely target is 50%, or 845.42.

Once the counter-trend rally is complete, we should see another sharp decline to well below 825. It is this next decline, which would be a third wave, that will light up the air waves with pessimism and despair. From that psychology of doom, finally, a tradable rally should emerge.


For traders, the big money maker will be that next decline, which could start at any time, as there is no law that says the retracement has to be a minimum of 38%, nor a maximum of 62%.

Knowing in advance that a rally could occur to the levels indicated on the chart should serve as a guide, both as to what is possible in the next day or two and more importantly, what to expect thereafter.


Disclaimer


This is all my own conjecture, opinion and modeling. It should not be construed as trading advice, nor as evidence of rational thought processes, nor of any logical sequence of premises based upon empirical observations that might lead to any hypothesis of predictive value.


En español


Todo esto es mi propia conjetura, de opinión y de modelado. Que no debe ser interpretado como asesoramiento comercial, ni como prueba de los procesos de pensamiento racional, ni de cualquier secuencia lógica de los locales sobre la base de observaciones empíricas que pudieran conducir a cualquier hipótesis de valor predictivo.



A