Peaks We Meet With Volume ~ The Risk Averse Alert

Wednesday, April 21, 2010

Peaks We Meet With Volume

Among several recent variations on an Elliott wave count from early-February bottom has been the following (which now is appropriately labeled to present)...


It is the second wave's "running correction" possibility that was presented previously, with the third wave now appearing completed. This view likewise remains in keeping with the possibility that, levitation will continue for some few-to-several weeks more still ... as lately has been thought likely.

Trading this week simply lends further reason to believe the market's advance since early-February is not yet complete. Still, the view above also suggests, near-term, a downward-biased correction probably is immediately in store before this, the final advance off March '09 bottom, at last is over.

What's waiting now is such corrective action as takes RSI below its low reading registered in late-February, during formation of the second wave of five waves up from early-February. Such an event, of course, would confirm the above Elliott wave count by providing technical evidence the advance off early-February bottom is, indeed, weakening.

Also going some way in raising the above Elliott wave count's probability is the recent volume spike. This has been a common occurrence at third wave peaks since March '09 bottom...


One other worthy note, too, is how volume spikes at third wave peaks mark the area near where subsequent fifth waves ended. So, any further upside in the advance off early-February bottom appears rather limited here.

Yet with all due humility, completion of five waves up from March '09 could bring another 50-100 points to the S&P 500 (this per Elliott Wave Principle "channeling guidelines" applied to the S&P 500 on logarithmic scale).

As you can see, all other things technical remain unchanged. Momentum (MACD) continues its long-enduring fade ... and relative strength presents the mark of suckers being slowly fed every last bit of dead equity — the likes of which apparently is being most decidedly sought after now, at this late hour. Suckers are, indeed, famous for exhibiting such marked interest at tops.

As ever before over recent months, then, the market's true, unhealed state awaits but completion of five waves [up] since March '09 bottom. Pressure built up in broke down, global systems (financial in particular) likely will find release in stock markets worldwide ... which probability, of course, has only been increasing ... while remaining absent has been any indication something prospectively less devastating might develop.

Fast Money
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