Saturday, January 14, 2017

Pro-Trump Volume Bump on a Maggot-Infested Garbage Dump

When last I reported the Elliott Wave count assigned to the S&P 500's counter-trend rally off March 2009 bottom was as follows...

Subsequent developments, however, necessitate this modest adjustment...

Wave (b) of B now marks its end at the S&P 500's early October 2011 bottom, rather than at its June 2012 bottom. As such, the S&P 500's October 2011 upside, "outside month"—a rare occurrence—now marks wave 1 of (c) of B. Fitting Elliott Wave guidelines, then, is a 3rd wave—in this case wave (c)—beginning with a rare "outside month" to the upside. Third waves typically are the most "dynamic" Elliott waves.

(Likewise, wave 2 of (c) forms a "running correction", and thus too reflects the dynamic quality of the Elliott third wave that is wave (c) of B.)

Development of five waves forming wave (c) of B now reveals clear indication of technical degradation contrasting component waves 2 and 4 (see RSI and MACD). This is typical in a 5-wave move higher. Also typical is wave 3 coinciding with the best technical readings occurring over the course of the 5-wave advance marking wave (c) of B.

December's huge uptick in volume is the first reason why wave 4 of (c) might be best seen ending in early November 2016. Wave 4 takes the form of a complex correction following wave 3 of (c) peak in July 2015, and is accompanied by volume tending to diminish right up to early November. Likewise, RSI early November dipped below its low earlier in 2016 when wave 4 of (c) reached its lowest S&P 500 reading. Taken together, coincident technical measures suggest wave 4 of (c) likely marks its end early November 2016.

(re: wave 4 of (c) having a "running correction" quality like wave 2 of (c), this is another demonstration of an Elliott 3rd wave's dynamism. Also we see a "like from like" manifestation in corrective waves 2 and 4 of wave (c) of B. Similarly, since Y2k peak—from which time a major Elliott corrective wave has been forming—both major "B" waves higher—2002-2007 and 2009-2017?—have lifted indexes into new record territory taking the form of a 5-3-5 "zig-zag." Another "like from like" manifestation, even as the Elliott Wave Principle's "alternation guideline" otherwise is evidenced over the entire duration of the corrective wave whose beginning traces back to Y2k peak.)

You might recall that in addition to volume persistently diminishing over the course of the market's counter-trend rally off March 2009 bottom, short-term peaks over the course of the advance were often met with a volume spike. December's spike likely is similar, and quite possibly another beast altogether. Look at it this way. Never during the market's advance off March 2009 bottom was there evidence of a "wall of worry" healthy markets display during their ascent. This would be evidenced by volume increasing as indexes move higher. Now, all of a sudden, "someone" evidently is worried. Never mind the well-tuned mechanism capable of snapping up a relative surfeit of massively over-valued trash while bids are pushed still higher. Been there, done that since March 2009 most emphatically. Now, however, "someone" has dumped an elevated volume of holdings. This "someone" in all probability understands that Brexit ventures chaos, a movement only more assured with a weighty supporter, Trump, now US President.

I will refrain from speculating when wave (c) of B might complete. Well enough is objective voice warning that a banking system built on Ponzi finance propped by the most under-capitalized, highly correlated "insurers" in history (yawn ... it's the derivatives, stupid!) finds my current Elliott Wave perspective remaining convinced that the moment of truth portended by all my prior ruminations looming as large as ever.

Upcoming wave C [down] still projects major indexes sinking to levels last seen in the 1987-1994 period. In case you are unaware or have forgotten from 1929-1932 the Dow Jones Industrials lost 89%. From 2000-2002 the NASDAQ Composite lost 82%. Plainly, index levels last seen in the 1987-1994 period are not out of reach.

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