I analyze macroeconomic issues from a fundamental perspective, and I analyze market behavior from a technical perspective. Original macroeconomic analysis can be found here and both macro analysis and commentary can be found on my Caps blog. If you like or appreciate my analysis, please add yourself to my Following List

Saturday, May 8, 2010

The Larger Count, with a P2 Placement that I Like

On April 27th, I was showing a possible count with 3 Minor Waves up from the February low, which could have served as the last Intermediate wave in P2: Boring Title #5

But what P2 did exceedingly well was to put the doubt into the mind of every single bear. I never had any doubt that this was a bear market rally, but every time I thought we had a legitimate top for P2, the market spat in my face. I started playing around with Cycle Degree X counts. But I was always adamant that this was a bear market rally. I NEVER bought the "new bull market" theory that has been gaining momentum. See these posts: Not All Five-Wave Moves Are Impulses: A Short Treatise on Elliott Wave and Another Impulse Wave Study: A Look at the 1974-1975 Low and Rally

But still, even after I counted (yet another) possible end to P2 on April 27th, I hemmed and hawed and I doubted myself. I wrote this on May 1st in this post: Reviewing the Larger Count

I would be more than happy, ecstatic in fact, if last week marked the top of P2. And if the move this next week and especially the week after that develop *decisively* downward impulsively, then I think we have the makings for a major trend change (which would make this bear **very** happy). This is the option that I am showing here: Boring Title #8

But this fine (but unfortunately busy :( ) Saturday morning I am reviewing the larger count structure. I had proposed this count last month: Update on My P2 Projection. I was drifting away from it since this "wave from hell" took us nearly to the 62% retrace, I really thought that this could be the top of P2 (and like I mention above it could)

... But it also could not. Lots of "Sell in May and go away" talk seems to coincide with the wave ending, so this is a compelling spot for a top. but it just seems too obvious now. Too many people are expecting it, so my Spider-sense is unfortunately tingling (that, or I need to switch to Selsun Blue)

In short, I doubted the possibility of a top and showed a sideways wave for the next 3 months before a top in July.

And there are some legitimate reasons for counting it that way

1. No divergence on the Advance/Decline Line
2. No divergence on the New High / New Low data
3. Minimal divergence on the weekly indicators

.... But EVERYBODY was looking for divergence. Many people have been looking at high/low data.

So I find it very apropos that the market flips all of us a bird and crashes, more or less, out of the blue.

P3 will be fast and furious. I think, as bears, we just had to wait for the opening salvo of P3 to mark the end of P2. I think (in retrospect) it was always going to come without warning. And now that we have it, we can get back to the business of what the Elliott Wave Principle is really meant for .... counting impulse waves

So just one thing to keep in mind, within extensions Wave 2s tend not to retrace as deeply as they otherwise would. Wave 2s are typically deep and fast retrace waves (50-78.6%). In extensions they are more typically 38.2-50%.

I am not offering advice here, but what I am saying is that I usually wait to buy wave 2 retraces at 62%. Within P3 I will be more aggressive with entry shorts and give myself a margin of safety should the move go up past my entry before resuming violently down.

I think the next few years are going to be very interesting. Good luck to all!!!

blog comments powered by Disqus