Millions Out Even 2009? ~ The Risk Averse Alert

Wednesday, May 06, 2009

Millions Out Even 2009?

Keeping with yesterday's bear market bounce reminder ... and still seeing a technically vulnerable configuration across the spectrum ... a new Elliott view of the market's rally off March '09 bottom is brought to light.


Three waves up — (a)-(b)-(c) — rather than the five presented before.

A 5-3-5 (zig-zag) wave (a) ... a 3-3-5 (flat) wave (b) ... and five waves up forming wave (c). The Elliott Wave Principle's "Rule of Alternation" in practice.

RSI and MACD confirm this view, too. Their "breakout" performance, right now, is fitting a third wave (i.e. wave (c)).

Today's volume ... what up with today's bump in the volume of shares exchanged?

Well, if there's follow-through — if bearishness proves misplaced — then we probably will know very soon ... by, say, the end of the week. If there is going to be an explosive, upside breakout, then today's volume would suggest this move likely is imminent.

If, however, there's no follow-through, then today's bump in volume likely came from a "happy to get out even in '09" crowd.

NYSE 5-min

It's no strange coincidence that, 5-minute RSI registered a buy-side extreme during the formation of a third wave of a third wave of a third wave (i.e. wave iii of 3 of (c)).

Same price channel first presented last Friday remains intact. However, the Elliott Wave count above suggests top probably is not but minutes away. Nevertheless, a most reasonable read of underlying technical conditions continues supporting the likelihood top is near.


Looking over the course of the past year-and-a-half a bear market, this measure offers a cautionary view of every bounce as it was losing gas.

The present state of things appears to bolster the case supposing today's bump in volume came from a crowd heading for the exits, happy to be even, and quite likely not soon to reenter. We will know with greater certainty over the next few days whether this, in fact, is true. If so, look out below.

Fast Money
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