S&P 500 - Wave 2 ended at the ideal target area

Wave 2 ended at the upper range of the target area set yesterday, which adds confidence in the bearish count.

The decline from 1,209.37 does look impulsive in caracter, but 1,205.50 must not be broken now as that would leave us with a three wave decline only and would force me to adapted the bullish count calling for a new high above 1,219.80.

I do like the bearish count better, but I'm a little concerned about the almost to perfect five wave decling from 1,205.50 to 1,191.92, but a break below 1,191.92 would "kill" that concern.

A break below 1,191.92 should spark prices a lot lower as that should be wave iii of 3. Wave iii should fall to at least 1,175.70, but I wouldn't be surprised to see a decline to 1,165.19 as wave iii extends.

S&P 500 - Wave 2 or B is on its way

I have reviewed my previous count, and has changed is slightly. The above count works better, as the relationship between the waves is much better. Wave 3 is 1,618 times longer than wave 1 and wave 5 is almost equal in length with wave 1.

If wave [B] ended at 1,219.80, then the ongoing correction should be a three wave affaire ideally endning in the blue box followed by a collaps in prices.

However we can't exclude that this was a c-wave decline a one more new high should be seen, but the risk reward shorting in the area of the blue box is most ideal one can get, as prices is not allowed to break above the top at 1,219.80, as that would call for a move higher towards the 1,226-1,237 area before prices turn down.

FTSE 100 and DAX - Topping?

A Shoulder/Head/Shoulder top has been activated calling for further downside action in the short term. The S/H/S neck-line should stay intact or just be breached slightly before the break below 5,535 for a move closer to the 5,450 S/H/S target and ending wave 1 down.

The decline since the top is clearly the biggest and fastest we have seen a very long time. We still need more more decline the 6,026 bottom to have a 5 wave decline, which should ideally be followed by a three wave rally towards the 6,221 area adding confidence in the call for an important top.

S&P 500 - Is a running Triangle forming?

The last three waves since the bottom of wave (iii) has been three wave affaires, which could point to a running triangle forming as wave (iv).

If it's a triangle we are only about to finish wave c so wave d and e will first be seen tomorrow and Friday.

S&P 500 - More downside to come

I still look for more downside finishing wave 3,4 and 5 ending the first wave of one lager degree.

Remember we are looking at a very small degree here (5 minutes). When this first 5 wave decline is done, we are only looking at wave 1 of one higher degree. Wave 1 should be followed by a 3 wave rally which ideally retrace 61.8% of wave 1. Close to the Wave 2 peak will be the absolutly best time to short this marke, as the stop-loss can be placed just above the peak of wave [B] at 1,219.80.

We will have to wait a see how wave 2 plays out.

Danish OMXC20 - Top in place

This one is just for fun:

The Danish OMXC 20 index just had a perfect back test of the big Shoulder/Head/Shoulder top neckline, that was triggered in October 2008. The rally since the bottom early March 2009 has been a double Zig-zag. Wave C in the first zig-zag relatede to wave A, as wave C became 61.8% the length of wave A. Wave A2 in the seconde zig-zag relatede to wave C2, as wave C2 became 1,618 times longer than wave A2.

As the rally from early February has been very steep expect an equally fast a deep decline.

In the bigger picture wave [B] retraced just over 61.8% of wave [A] and we should now see wave [C] down to at least the 166 - 174 area.

S&P 500 - The decline looks impulsive

The decline does have the right impulsive look. Now let's have wave wave (v) of 3 down to the 1,186 area and finally wave 5 down just slightly above or slightly below 1,183.80, followed by a 3 legged rally to the 1,206 area.

Goldman Sachs and Apple showing signs of weakness

Goldman Sachs has broken below is uptrend line since ultimo 2008 and it should just be a question of time before support at 147.81 is broken, which should accelerate the decline.

Mayn analysts has down-played the seriousness of the charges against Goldman Sachs, but I think the chart tells us, that it's more important, than they want us to believe.


A couple of weeks ago I had a post under the title "Is Apple forwarning the top" Over the last two days, we now have a possible Island Reversal and the possibility for an even bigger Island if the market makes a new gap in the area between 251 to 255.

Maybe, just maybe, these two frontrunners tells us something important.

S&P 500 - Follow-up on my earlier post

The decline since 1,219.80 does look impulsive in caracter. It's still very early, but I would expect a continuation down towards the 1,192.27 area.

We still need a break below 1,183.80 to confirm the top, but it looks fine for now.

S&P 500 - The top could be in place

We are in the endgame of the Expanding Diagonal. It's just a matter of time before the top is finally in place. I would have loved to see a rally into the 1,226-1,237 area, but if yesterdays top at 1,219.80 is it, that's fine for me too.

After having reached a top at 1,219.80 prices turned down, but not as impresive as I would have liked, but it might come today.

Wave C now has 5 waves, therefore could end any time now. To add confidence we need a break below 1,190.57 and more importantly 1,183.80 as a break below here would confirm that an important top is in place.

The alternate count is that an Ending Diagonal is forming, but as only two waves has finished, that would premature to make this call. A break below 1,183.80 would eliminate the Ending Diagonal possibility.

A Wave [B] could have finished with the test of 1,219.80 yesterday. The current decline could be a wave 1 and 2, but this is still a very early count and nothing is given yet.

I would like to see a 5 wave decline followed by a 3 wave rise, before making the final call.

S&P 500 - Last rally up is under way

Friday we saw a thrust out of the triangle (I had to change my count slightly as we didn't see any real setback in Fridays trade, which could have been a E-leg)

We should see a move higher towards at least 1,222- 1,223 area, but I wouldn't be surprised to see a move closer to the 1,226 - 1,237 area, before the top is finally in place.

The start of this rally from 1,044.89 has been just as odd as this entire rally from March 6 2009, but the most likly reason for that is, that we need enough to cross-over to the bullish camp, before being ready to begin the next deep decline. In my humble view, we are only a small group left looking for a bigger decline to follow this rally. Many just think, that a small correction to lift the overbought conditions will be enough to produce the next rally higher.

A close-up of the triangle and the final rally is shown below.

On April 7'th I had a post under the name " Could Apple be forwarning a possible top?" (http://theelliottwavesufer.blogspot.com/2010/04/apple-could-apple-be-forwarning.html)

Today we saw a nice Throwover the wave 2-4 channal, which tell us that a important top is close at hand. You should also notice that the last part of the price chart has become vertical, which is a clear sign of a "bubble" or overconfidence among investors.

A top in Apple will match a top in the major indices perfectly. It's time to be carefull!

USD/JPY - Diamond formation activated

A big Diamond formation was activated in late March for a rally towards 97.20.

Looking at the wave count (see below) we can see that a five wave rally from 88.10 is shaping up. Wave 2 was a flat correction, while wave 4 alternated and became a sharp zig-zag correction. Wave 5 is ongoing confirming the Diamond target at 97.20.

USD/CHF - Breaking above important resistance

The break above the falling resistance line from ultimo 2008 is important. It's confirms that wave (iii) of 3 is well under way. Do expect support 107.14 to hold, but we must accept a deeper short term correction towards 106.31 before the next rally through will be seen. Wave (iii) should reach at least the 112.06 area, but will more likely continue towards the 116.87 area.

Notice the overlap of black circle wave 1, that, I think, is important as it tells us something about EUR/USD too. It is possible to count a five wave decline in EUR/USD (see the chart below), but looking at black circle wave 1 and black circle wave 3 they are almost equal in length (wave 3 is a little longer than wave 1), which means that wave 5 should be small or become the extended wave. EUR/USD and USD/CHF tend to trend together, therefore I would expect black circle wave 5 in EUR/USD to extend as wave (iii) of 3 of black circle wave 3 in USD/CHF kicks in.

I have also shown the very bullish alternate count on the bottom of the EUR/USD chart below, it is a possibility, but for now my prefered count is the one where black circle wave 5 becomes the extended wave.

S&P 500 - The mess continues. Tringle shaping up?

Yesterdays rally above 1,206.32 "killed" the Leading Diagonal giving the decline a clear correctiv look. As long as important support at 1,183.80 protects the downside, we will have to accept more upside pressure.

The hole mess since the top at 1,213.82 could be a triangle shaping up. If it's the case we need one more decline close to the 1,195 area before the final thrust higher towards the 1,226-1,237 area.

This is fine-tuning whats more important is, that all demands for the Expanding Diagonal is fulfilled calling for a major top and decline soon.

I will cover my shorts from close to 1,204 on the decline towards 1,195 and await a new selling oppotunity near 1,226 or a break below 1,183.80.

S&P 500 - Was the mess yesterday a Leading Diagonal?

I was looking over the S&P 500 after we saw a breakdown in early trading, as my "double zig-zag" should have produced a new rally higher, but as it didn't something else has to to be in marking. If the top at 1,210.99 was the ending point of wave 2 or B then the mess yesterday could have been a Leading Diagonal (see the chart). That would explain the very impulsive decline in early trading and call for even more down side in wave 3 or C.

A clear break below 1,181.40 will add to the bearish case and call for a decline to 1,175 or even 1,167.

FTSE 100 and DAX in topping process

A Shoulder/Head/Shoulder top has been activated in the UK FTSE 100 Index. The ongoing decline should reach at least the 5,556 area, but this decline could be much deeper, as we could easily have seen the end of wave [B].

The German DAX index also have formed a Shoulder/Head/Shoulder top, but it hasn't been activated yet, but a break below 6,140 would activate it for a decline to at least the 5,966 area. Again this could be the start of something much bigger, as wave [B] could be done.

S&P 500 - More upside pressure will be seen

We did't quite reach the 1,214 target area yesterday, but the decline from 1,210.99 is clearly corrective (double zig-zag), which means we should see more upside pressure before a new price collapse will be seen. Looking at the VIX-Index it didn't make a new low beneath 15.23, which also supports my view of more upside pressure to come.

Looking at the bigger picture, we are in a topping proces. Wave E in the Expanding Diagonal is done. We have seen a exhaustion sign as prices have broken above the resistance line. We have divergence on the RSI indicator and the MACD indicator is rolling over and showing divergence too.

An important top should soon be seen.

Economic Deja Vu?

One of my fellow Bloggers had this posted yesterday:

"If America’s economic landscape seems suddenly alien and hostile to many citizens, there is good reason: they have never seen anything like it. Nothing in memory has prepared consumers for such turbulent, epochal change, the sort of upheaval that happens once in 50 years. Even the economists do not have a name for the present condition, though one has described it as "suspended animation" and "never-never land."

The outward sign of the change is an economy that stubbornly refuses to recover from the recession. In a normal rebound, Americans would be witnessing a flurry of hiring, new investment and lending, and buoyant growth. But the U.S. economy remains almost comatose a full year and a half after the recession officially ended. Unemployment is still high; real wages are declining. At a TIME economic forum last week, forecasters predicted that U.S. growth would amount to only 1.8% this year and 2.6% for 1993, about half the speed of a normal recovery. The current slump already ranks as the longest period of sustained weakness since the Great Depression.

That was the last time the economy staggered under as many "structural" burdens, as opposed to the familiar "cyclical" problems that create temporary recessions once or twice a decade. The structural faults, many of them legacies of the 1980s, represent once-in-a-lifetime dislocations that will take years to work out. Among them: the job drought, the debt hangover, the defense-industry contraction, the savings and loan collapse, the real estate depression, the health-care cost explosion and the runaway federal deficit. "This is a sick economy that won't respond to traditional remedies," said Norman Robertson, chief economist at Pittsburgh's Mellon Bank. "There's going to be a lot of trauma before it's over." "


MP (Mark Perry): Sound familiar? It could easily have been written to describe the current situation, but it was actually written at the end of September 1992, a full 18 months after the 1990-1991 recession had ended in March 1991. More importantly, it was written in the early stages of the longest (120 month) and strongest economic expansion in the history of the U.S. economy that lasted until March 2001. Maybe media "gloom and doom" is a good leading indicator of future economic expansion. Hopefully it's "déjà vu" all over again.

The article was posted in The Time Magazine Monday, Sep 28, 1992. (http://www.time.com/time/magazine/article/0,9171,976602-6,00.html)

I will admit as Mark J. Perry says, that it easily could have been written to describe the current situation, but I totally disagree in his hopeful "déjà vu" all over again.

First take a look at the Dow Jones Industrial Index below. I have marked the point where Time Magazine first printed Mark's article (which to be honest is very good) and then his yesterday re-run of the article under the name of "Economic déjà vu".

First of all does these two points resemble each other at all? I my humble view I think NO WAY! Also taking into consideration that the Baby Boomer generation reached the time in their life where they spend the most in 1990's. This group is the biggest born ever and their buying power at this time was huge. Going fast forward to today many of the Baby Boomers has already retired or are headed fast towards retirement. They have more or less been financial destoryed since year 2000. First they got caught in the Dot.com bubble, then Greenspan played the housing card and they got caught in the biggest housing bubble ever, bringing the economic to the worst halt since the 1930's. Now they are just hoping to get a decent retirement. They will not and can not begin spending again like they did in the 1990's.

Bernanke, I'm sure, will do whatever, to try to get the consumers up and running again, but it can't be done and he will loose this battle no matter what. If Bernanke somehow succed in blowing yet another bubble, it will bust quicker than the housing bubble did and the result will be even more devastating.

Also being a contrarian this hope of Mark Perry, is, in my view, build on a very weak foundation, which can be destroyed at any time now. In the Elliott Wave Principle A.J. Frost and Robert Prechter brings a quote from "Robert Rhea", where he descirbes the emotional climate

... many observers took it to be a bull market signal. I can remember having shorted stocks early in December 1929, after having completed a satisfactory short position in October. When the slow but steady advance from January and Frebruary carried above the privious high, I became panicky and corvered at considerable loss... I forgot that the rally might normally be expected to retrace possibly 66 percent or more of the 1929 downswing. Nearly everyone was proclaming a new bull market. Services were extremely bullish, and the upside volume was running higher than at the peak of 1929.

Sounds familia? I think it sounds as everthing we hear today.

VIX & S&P 500 - Do we really need one more new high?

Yesterday I wrote that the decline from 1,213.86 was a five wave decline, which would call for a three legged rally towards 1,204 before a new decline to at least 1,175 should be seen, but the rally went well beoynd 1,204, whats more important the shape is of concern as it looks like a running triangle. If it's a running triangle we should see one more rally higher towards the 1,214 area today, before prices collapses.

This also fits the VIX-count, shown below.

An Ending Diagonal (ED) is shaping up, we just need one more decline to just below 15.23 ending the final leg v down in the ED, which should be followed by a powerfull thrust
to the upside.

If you shorted the S&P 500 yesterday near the 1,204 area you could choose to close the position on a break above 1,208.07 and re-sell near the 1,214 target area or you could just hold on to your position waiting for prices to collapse from near the 1,214 area.

S&P 500 - Is wave [B] finally done?

The decline from 1,213.82 down to 1,184.06 is clearly a five wave decline, which we can lable 1 or A The current rally can only be wave 2 or B as the decline was a five wave matter it can't be totally retraced, so the area between 1,199 - 1,204 will be an ideal shorting oppotunity for at least one more decline to the 1,174 - 1,175 area if it's a B wave. If however it's wave 3 we should see 1,174 break without much support. When the bottom of wave 1 or A is broken your stop should be lower to just above the top of wave 2 or B.

As I worte last week, I will trade this decline as if wave [B] has finished.

Australia Ordinaries - Is wave iv of 5 building?

Ideally wave iv of 5 is currently bulding after wave iii peaked at 5,048.60 calling for one more rally above 5,048.60, when wave iv is done near the 4,883 area. As wave ii was a simple Zig-zag wave iv should be a flat or a triangle.

This down move should not break below 4,733.10 at any time. A break below 4,733.10 would change the count in favor of a finished wave 5 of [B] at 5,048.60 calling for a much bigger decline.

AUD/USD - Wave 5 is still ongoing

Wave 5 is still ongoing, but the upmove since the wave 4 bottom at 85.76, has been a weak one, with overlapping waves, which point towards an Ending Diagonal forming. Looking at the structure wave A and B has ended and wave C is forming, therefore a bottom near the 91.47 area for a move higher towards 95.40 endning wave C can be expected. Wave D should ideally end near the 93,75 area and finally a move towards 97.98 in wave E endning the entire C-wave.

A break below 89.98 would call the Ending Diagonal into question.

DJI and S&P 500 - Wave E of the Expanding Diagonal can end any time now

Wave E have now broken slightly above the Expanding Diagonal resistance line, which will mark a typical exhaustion signal. A close back below the resistance line will confirm the exhaustion, while a break below short term key support at 10.948,08 will confirm the top.

Looking at the S&P 500, the picture is identical. A close below the Expanding Diagonal resistance line will confirm exhaustion, while a break below short term support at 1.188,91 will confirm the top.

The VIX-Index (see the chart below) close below the lower Bollinger band has confirmed the bearish set-up for the equity markets and it's just a matter of time before a top will be found.

Only question that will remain is if this is the "BIG" top or just a short term top. I personaly will trade it as the "BIG" top ending wave [B], but time will show. The uptrend since March 9, 2009 has been a very hard to deciffer, but for me it's not a question if this is a bearmarket rally or a impulsive five wave rally. The uptrend eventhough it has been impresive in many ways is way top sloppy top be counted as an impulsive five wave rally. Take a look at the supposed wave 3. The Elliott Wave Principle stats that wave 3 are "wonders to behold", this wave 3 is absolutly no wonder to behold.

The Benner-Fibonacci Cycle

On page 151 in the Elliott Wave Principle, A.J. Frost and Robert Prechter has and illustration of the Benner-Fibonacci Cycle Chart 1902-1987.

I have updated the chart from 1987-2041. As can be seen the chart shows that a top should be found i 2010 and a low in 2011. The low in 2011 is not a panic low as 1987 and 2003 was.

Benner himself noted in respect to the economic lows (stock prices low), that they followed two time series. One follwed a 20-18-16 year serie indicating "bad times" (1987 and 2003), while the less "bad times" followed a 16-18-20 year serie in the chart illustrated by 1995 and 2011.

Economic peaks (stock market highs) follwed a 8-9-10 year time serie. As can be seen above year 2000 was a important high, while 1991 was less important. The 2010 high in that respect is a less important high than what 2018 will be.

Martin Armstrong later discovered the 8.6 year cycle. The Chart below shows his Economic Confidence Model, which shows when the US economy peaks and bottoms out. As can be seen the economic confidence should have seen a minor peak on April 19, 2009 and continued to worsen untill June 13, 2011. Instead of a continued worsening of the US economy (and global economy) the US and other Governments injected major stimulus. The major centralbanks printed money, bought bad debt from the banks ect., which caused an inversion in the cycles, that inversion is still ongoing, but due to Benner's cycle that should end some time during 2010 (my best bet would som time during second quater 2010 - April or May?) and cause bigger deterioration in the economy as a catch-up effect.

Therefore, when Governments finally stop stimulating the global economy the crash following could very well be much bigger than Benner's cycle would otherwise indicate.

S&P 500 - Wave E of the Expanding Diagonal is almost done

S&P 500 is faceing strong resistance near the 1,200 area. On Friday the S&P 500 closed above the upper Bollinger band and yesterday the VIX Index closed below it's lower Bollinger band, which in both cases is bearish.

Looking at the hourly chart below we can see, that the E-leg in the Expanding Diagonal could finish at any time now calling for a violent decline in prices. Yes we might need a little more upside action, but it's not worth fighting to squeeze out the last one or two percent, risking five or ten percent. If you want to stay with the trend (which is up for now) then use a stop at 1,175 protecting you from getting caught when the stocks turn lower.

VIX - Closed outside it's the lower Bollinger Band

The VIX index closed at the lowest level since July 22 - 2007 yesterday. The equity market again feels very complacency, when the equity market enters this area the risk of at least a bigger correction becomes imminent.

When the VIX index closes below the lower Bollinger Band some kind of top becomes even more imminent. The chart below shows the times when the VIX index breaks above or below the Bollinger Bands. As can be seen a close above the upper Bollinger band is bullish for stocks, while a close below the lower Bollinger band is bearish for stocks.



The Chart below is just a close-up of the chart above.

Australia Ordinaries - The uptrend continues

The uptrend continues to push ahead making new highs. At this point we are just below the 50% retracemnet target at 5.036,16, which should be tested soon.

Suport is found at 4,954, but only a break below suport at 4,845 will confirm that the top is finally in place for a decline to at least the 4,483 area. Longer term the decline should be much deeper.

AUD/USD - wave 5 of C is under way

The break above 91.98 forced me to change my count to a more bullish on. Breaking above 91.98 wave couldn't already be finished and the peak at 94.05 was only the wave 3 of C peak.

Wave 5 of C should soon gain momentum for a move closer to 97.98 where wave 5 will equal wave 1 in lenght. It's quiet normal for wave 1 and 5 to be equal in lenght when wave 3 extends, as is clearly the case here.

Looking at the bigger picture is still see this rally as part of a flat correction, which would call for a deep decline back to 60.04 when wave B is done, but for now a move above 94.05 for a rally closer to 97.98 is in the cards.

DJI - The Expanding Diagonal near completion

As long as support at 10,816.43 continue to hold we can expect a move closer to the 11,100 - 11.200 area before wave E in the Expanding Diagonal finaly completes. That said my short term indicatores are begining to roll over telling, that a top is close at hand, but we need a break below support at 10,816.43 before calling a short term top.

Looking at the longer term picture (see the weekly chart below)we are clearly overbought and the MACD-Indicator is showing signs of negative divergence telling us, that a long term top is near. We migth need more time trading sideways or sligthly higher, but we are clearly at levels where you don't want to be exposed even harder and should concider selling and move to cash and wait for the oppotunity to go short.

APPLE - Could Apple be forwarning a possible top?

Apples CEO, Steve Jobs, will be on the cover of the current number of TIME MAGAZINE, which will hit the streets on April 12 - 2010.

The inventor of the "Magazine Cover Indicator" Paul Montgomery found, that when a company's CEO appears on the cover of a weekly magazine like TIME or NEWS WEEK at the same time as the company's stock prices makes new highs the final high will be found within four month after the CEO's apperance.

Looking at the chart of Apple (Ric: AAPL) below, we can see that prices more than doublet in price over the last year. Drawing a wave 2-4 channel wave 5 have just broken above the resistance line drawn from the top of wave 1, which points towards a important top close by.

As can be seen the RSI indicator also shows clear divergence warning of a possible top being close at hand.

Apple have been one of the leaders of the rally since early 2009 and migth be forwarning, that the rally is drawning to a close.

The "Magazine Cover Indicator" is not the holy grail, but it has worked wonders so many times, that one just can't ignor it.