More Than a Sinking Feeling ~ The Risk Averse Alert

Thursday, May 19, 2011

More Than a Sinking Feeling

Another "PGA Cinderella Story" in the making?


Descending peaks and valleys the NYSE Advance-Decline differential has registered since late-June 2010 bottom before have been noted, this in substantiating a so-called "rising wedge." Naturally, this trend continues despite a revised Elliott wave view. Still-increasing underlying weakness the NYSE Advance-Decline differential reveals likewise substantiates this revised view toward the market's advance since late-June 2010.

Now, a further permutation of this same evidence in relation to the unfolding, 5-wave advance...

As downward corrective waves have unfolded, a common, positive divergence consistently developed. Wave 2 (August 2010) found bottom with the market's underlying strength increasing. Likewise did the same occur in formation of waves a and c of 4.

Presently, wave e of 4 — another downward corrective wave — still appears to be unfolding. Yet it rather appears the same increase in the market's underlying strength might not materialize. Instead, increasing underlying weakness accompanying the market's advance since late-June 2010 might rather be but further evidenced.

Already, the NYSE Advance-Decline differential during formation of wave 4 has weakened from its worst during formation of wave 2 (see green line), thus demonstrating typical technical behavior common to 5-wave advances. Yet confirmed underlying weakening could extend further as wave 4 completes straight ahead.

Indeed, I dare say it should. Surely, if underlying weakness were to increase as wave 4 [of (c)] completes over upcoming days, then only further confirmed would be an Elliott wave-based view warning of the market's impending dismantling...

Fast Money
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