An Elliott Corrective Wave With Top in Rear View Mirror ~ The Risk Averse Alert

Tuesday, May 19, 2009

An Elliott Corrective Wave With Top in Rear View Mirror

We could take the technical tour just about anywhere and still make a solid case for trouble ahead. No need to go there, then. My position stands on such merits as have been piling up here for days.

So far this week we have seen things fitting the moment ... as well as the Elliott Wave Principle.

Yesterday, a suspicious improvement in underlying conditions (as registered by the NYSE Advance-Decline differential) was noted for being fitting a moment naturally finding some players fearing they are missing the boat, as well as demonstrating standard Elliott Wave character.

Today, more substantiation of an Elliott Wave view assuming top is in ... currently finding a completed, initial move down being corrected.

NYSE 5-min

The NYSE Composite's advance from Friday afternoon is seen as a "c" wave of an a-b-c correction that began early the day before (Thursday, 5.14.09). "C" waves in the Elliott Wave Principle are third waves and, as you have read here before, typically coincide with notably dynamic underlying conditions.

Just look at that RSI ... parked on the buy-side (above 50) for hours ... showing no clear sign of quitting until ... today's last hour.

That's "c" wave character. And, chances are, this "c" wave is over. But not so fast my friend if you're thinking now is time for a quick turn south...

NASDAQ 5-min

Yesterday's suggestion that, trading this week might be range bound gains traction in view of NASDAQ Composite's unfolding since its top. The Elliott Wave Principle indicates 2nd waves sometimes retrace nearly all of the preceding 1st wave. This one might come close.

Not only that, but the market still might trade sideways for a time before falling with some vigor. Like I said yesterday, indexes could decline back to last Friday's lows, then bounce once more before finally coming unglued.

Whatever. As long as top continues to hold, everything is cool.

Fast Money
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