Major Top At Hand ~ The Risk Averse Alert

Monday, November 11, 2013

Major Top At Hand

Our next bit of technical evidence supporting the Elliott wave view developed here last week suggesting the market's counter-trend rally off March '09 bottom either completed just days ago, or is but some mere days from completing, likewise finds present conditions in such a state as likely will soon bring clarity to current uncertainty over whether top in fact is in.

Much like technical circumstance presented by way of the NYSE's new 52-week high-low differential on Friday, the current state of the NYSE's Bullish Percent Index finds its uptrend since June's setback right on the precipice of being broken. Already have negative divergences registered by way of this technical measure's performance since June (that is taking into account the fact indexes have extended to new heights over the interim), so risk of the market turning decidedly lower and raising probability the counter-trend rally off March '09 bottom completed late-October is both significant and credible. Any move sinking $BPNYA's RSI (top panel) below 30 and its MACD (bottom panel) to the negative very well could spell doom, kicking off what might prove a devastating selloff going into year end.

We see above typical 4th wave versus 2nd wave technical deterioration registering with the unfolding of component waves forming wave 3 of (c) and wave 5 of (c) (see $SPX for our current wave count). Yet we do not see the same contrasting $BPNYA at wave 2 of (c) bottom (late-November 2011) versus wave 4 of (c) bottom (mid-November 2012). We might consider the fact that, the NYSE's new 52-week high-low differential registered its best reading since March '09 bottom at the very conclusion of wave 3 of (c) as playing something of a determining factor here. Thus, typical technical dynamism accompanying Elliott 3rd waves (in this case wave (c)) can be assumed demonstrated by the fact $BPNYA during formation of wave 4 of (c) did not dip below its low set during formation of wave 2 of (c).

Yet in the prospective matter of wave B forming off March '09 bottom, we also see by way of the NYSE's Bullish Percent Index circumstance indicating "something's not right" displayed by the fact this measure's best reading in the interim since March '09 was registered during formation of wave (a) of B and its best during wave (c) of B was not seen until very late in its formation (at the peak of wave iii of 5 in fact). This latter matter might in fact serve to raise probability wave 5 of (c) could continue forming as year end approaches, thus delaying the onset of wave C sharply lower until early next year. Seeing as the garbage levitation trade has proven extraordinarily resilient, we might rather expect the game of "make believe" being played since 2008's disaster could press on for a few more weeks. Yet technical circumstance developed here these past few days strongly suggests the game is on its last legs...

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