Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Ewaves
I'll consider the SAP and INDU are in Wave 5 from late April. The first pullback was a deep zigzag, and the second correct was a flat. There was no over lap of these correction so there is no ending diagonal. The only difference with the NAZ is the pullbacks were very shallow. This fits the model that greater risk taking occurs at market tops.
NAZDAQ waves
There is still a possible push higher before a reversal on the NASDAQ. The rally from the May 10, 11 had a choppy beginning, so there could have been several waves 1-2 followed by smaller waves 1-2. The rally is a ZigZag.
Judging by the futures in the premarket, the SAP500 is at the levels of resistance. Pop and drop is better than 75%.
http://charts.barchart.com/chart.asp?sym=$NASD&data=Z30&date=052605&den=HIGH&evnt=AD...
SAP500 wave b triangle
Since Tuesday's high a clear motive wave to the downside finished the middle of this afternoon.
http://finance.yahoo.com/q/bc?s=%5EGSPC&t=5d&l=on&z=l&q=l&c=
The last half of today rallied before moving sideways in a multi-minute triangle. Generally there is only one motive wave after a triangle, and it is a spike equal to the width of the triangle.
http://finance.yahoo.com/q/bc?s=%5EGSPC&t=1d&l=on&z=m&q=l&c=
The forecast tomorrow is a rise no higher than the 1193 (61.8% retracement) area before a strong selloff, quite possibly lower than today's lows.
End of Day Rally- Wave 5
From Monday's high to about 2:30 Tuesday, a triangle formed, signalling a wave 4. There has been a relatively strong move this past hour that should meet resistance near the intraday high. Tomorrow should be the selling pressure I commented about this past weekend. Time to sell the end of day rally.
Value Line E-Wave Count
The VLE, SAP500, DJIA, and NAZ are similar so the generalities of the following comments apply to all indexes.
Nothing has happened to eliminate either bear or bull e-wave counts in the Value Line Arithmetic index. Bulls are looking at the first of a double zigzag wave 5 of an ending diagonal from the Oct '02 lows. Bears are looking at the end of a Wave 2 zigzag and beginning of a Wave 3 of a larger wave 1 in the new bear market.
So far the zigzag is near a 61.8% retracement level from the March '05 highs, and a around a 38.2% Fibonacci time
relationship, so it is ripe for a reversal. In either case, next week the index should move lower.
For the Bullish count to be eliminated, the index would have to
drop below 1627. For the Bearish count to be eliminated, the index would have rally above 1775. You can see that by the time
the present bearish count is eliminated, a new bearish stand should be taken ;)
http://stockcharts.com/def/servlet/SC.web?c=$VLE,uu[w,a]dacayyay[db][pb50!d20,2!f][vc60][iLp14,3,3!L...
Hedge Funds Plan to Liquidate.
This is going to put a drag on the market. The fact that some hedge funds require a 30 day notice for withdrawals and limit redemptions to once per quarter impies these funds are liquidity traps for the investor.
This is the last rally to distribute these shares. Market should turn next week.
http://www.safehaven.com/article-3100.htm
May 16 - Financial Times (James Drummond): "Hedge funds are liquidating positions in the expectation that investors will be redeeming substantial sums in early July, according to prime brokers and fund managers. Many hedge funds offer only quarterly redemption and require 30 days notice that investors will be withdrawing funds. This means that fund managers are looking to find cash at the moment so as not to be caught short next month. The past two weeks have proved among the most testing times for hedge funds since the collapse of Long Term Capital Management in 1998. No well-known names have gone under since the debt of General Motors and Ford was downgraded to non-investment grade this month, but many hedge funds are on the defensive."
Parabolas are generally followed by crashes.
Be sure you sell when enthusiasm is topping, indicated by the fronmt pages of magazines. Don't even short until the first bounce off the 100% retracement of the spike.
In general, the markets are overbought at this point.
The rally may continue briefly into Monday to make the Zag rally 7 days, just like the Zig rally from April 29ish.
Leading Dow components such as UTX and GE are near their turning points. So many of the lagging Dow components are near the end of their corrective rallies. There is not much potential for a prolonged rally the next couple of weeks.
The best Bullish case is that UTX and GE are forming ending diagonals, with wave 1 of 5 complete today. The next Bullish case is a double zigzags, with the zig completing today. The least Bearish case is today is the turning point, and massive selling will begin next week. The most Bearish case is Large Wave 3 begins next week.
SP500 in a higher degree hourly Wave 4
There is still an hourly Wave 5 to complete this rally.
Maybe into today's close?
Not a Wave 4 Triangle.
9:45 AM to 2 PM: Possible ending diagonal with truncation.
After 2 PM: good looking motive wave that sharply retraced the truncation.
Another Intraday Wave 4 Triangle.
That's the best count as the market continues to consolidate for a final push up late today or tomorrow on this multi day ZigZag that started in late April '05
German DAX - multi wave 4 triangle
This singal one last push this morning and then a couple percent pullback over the next week or two. The markets are supporting the idea of being in WAVE 5 of a 2.5 - 3 year ending diagonal.
So look for double zigzag or a smaller degree ending diagonal over the next 3 months, resulting in a Fibonacci 34 month wave.
http://finance.yahoo.com/q/bc?s=%5EGDAXI&t=1d&l=on&z=l&q=l&c=
Lexus300: Bradley
If the Bradley forecast is correct, then the Dow could break below 10K briefly as it wraps up large WAVE 4 from the March '05 highs. Large WAVE 5 into from June to August is in line with my time estimates of 3 months.
Elliott waves and Bradley models could telling the same story for UTX and GE (Dow Leaders), especially if both have just started tracing out multi week ending diagonals.
There are so many big name stocks (WMT, IBM, GM, AIG, FRE, FNM) out there that are nowhere near new highs that I have doubts about any sustained rally, or GOOG that is so close to a near term top.
DOW Leaders Near Top
UTX made a new all time high today. The elliott wave structure indicates one or two more days are left in the rally. This after noon shows a wave 4 triangle, but that doesn't mean there is only one more wave 5 up. There could be higher degrees of wave 4's and 5's to complete. After that, the top of a 2+ year ending diagonal should be complete.
GE's rally above the 4 month trendline is a wave 5 it looks like a zigzag to this point. I'm looking for another little push higher to complete the wave 5.
10 Yr Tsy Yield Going Under 4%
It looks like a 2 year triangle in the 10 Yr Tsy is now a wave 5 down. A US bond rally coupled with gold/silver sell off is signalling deflation.
Since Inflation is a borrowers best friend, Deflation has got to be the enemy. As the yield curve inverts, traders will borrow money with lower long term interest rates, and buy short term bonds with higher yields.
2.5 Year Ending Diagonal
With the advances so far this week, the best possible wave count is the beginning of Wave 5 of the Ending Diagonal that started from the October '02 lows.
The implications are:
The SAP500 should not advance past 1304.6, and the timeframe is less than 5 months from now.
The DOW should not advance past 11276, and the timeframe is less than 3 months. Since this time horizon is less than that for the SAP500, then the SAP500 will probably end sooner.
There should be some volatility as this last rally can be a double zigzag or ending diagonal. There has already been one zigzag off the April lows and one pullback.
Signal Analysis Applied to Investing
Every investor wants an edge when to maximize profits. This analysis will give you insight to some of the advanced mathematical tools.
Fourier Series decomposes a signal into a series of sine and cosine functions. Typically the signal under study is periodic. Each sine and cosine frequency is a whole number multiple of the first frequency (harmonic), and may have a phase shift as well. Each frequency has a different amplitude as well; however, the amplitude is constant for a given frequency. When analyzing the frequency content of periodis signals with sharp edges such a sawtooth or square wave, Fourier series will produce a huge error. This is known as Gibbs phenomena. The market is not periodic because F(t) != F(t+nT) where n is any integer and T is the period. Even if a finite period of time were taken and turned into a periodic signal, the predictive value of Fourier series is worthless due to Gibbs phenomena; therefore Fourier series is a poor choice of analysis.
Kalman filtering is even more advanced and obscure than Fourier Series. It is also called an adaptive filter. The filter estimates the natural response of the system to be controlled and then adjusts the control algorithm. For adaptive filters to work properly, the natural response of a system must remain nearly constant over time. The Federal Reserve commissioned a study to use adaptive filters for predicting the economy. What the Fed concluded was the predictive ability was fairly good over the course of 3 to 6 months, but degraded with length of forecast time. What the "Consultant" or "Exepert" never mentioned in the report was the implications of this negative outcome. THE NATURAL RESPONSE OF THE MARKETS CHANGES WITH TIME!!! If I were commissioning another study of the economy using Kalman Filters, I would focus on how the natural response changes with time rather than the observable states that make up the economy.
Bandpass filters are the same of the level of complexity as Fourier Series. Like Fourier Series, bandpass filters decompose a signal into its different frequencies by letting only a few frequencies through and suppressing those outside the band. This is like tuning a radio, you are actually changing the center of the bandpass filter. When you come to a radio station, you can hear music. To generate the spectrum of the signal, the signal is passed through the bandpass filter thousands of times. Each pass through the center of the band pass is adjusted. All those outputs can be added together to indicate where the market is going. For signals that are periodic, the amplitude of a frequency will be constant. When I sent through 100 days of closing market prices, I noticed the amplitude varied for a frequency. Sometimes the amplitude grew over a several cycles, sometimes it tapered. This is an envelop of a lower frequency. I also noticed cycles would lengthen or contract a little. I'm still in preliminary stages of a developing the bandpass filters and software to "listening to the market" and perform the frequency analysis. There are some limitations to this technique.
1.) The filter must be primed with at least 30 pieces of data before the outputs have predictive ability.
2.) The analog to digital conversion process does not involve a low pass filter, so high frequency signals are part of the digital signal. When sending the digital signal through a digital bandpass filter on the computer, these high frequencies can appear as lower frequencies. This is known as aliasing.
3.) The rate of sampling is critical to the frequency under study. The desired frequency must be sampled at least twice as
fast. This is the Shannon Sampling theorem. ( for a frequency of once every 30 days, data muct be collected at least once every 15 days.)
4.) Data is not collected consistently enough. Markets are closed at the end of the day, weekends, and holidays. How are emotional levels, the driving forces of markets, measured when markets are closed?
Given these limitations there is less risk using bandpass filters for frequencies with a period greater than 2 months. If minute by minute data is available as on the market floor, bandpass filtering should yield good results from 10:30 AM to 4 PM. The first 1/2 hour has uneven opening, and it would take a good 30 samples to prime the filter.
I misunderestimated:
Ignore my comments about the markets heading higher. DOW broke yesterday's lows. That makes a lower highs/lower low sequence: Bearish!
Sloppy Market E-Waves
The markets are still in consolidation.
The SAP has several overlaps the last 3-4 weeks. This is complex wave structure. I think it's nearly over as It looks like the selloff from 1179 to 1160 ending yesterday morning was a triangle, signaling there is one more leg in the correction left.
http://charts.barchart.com/chart.asp?sym=$inx&data=Z60&date=051205&den=HIGH&evnt=ADV...
Meanwhile, The NASDAQ looks like it will trace out a ZigZag.
http://charts.barchart.com/chart.asp?sym=$nasx&data=Z60&date=051205&den=HIGH&evnt=AD...
We'll see.
GE: Rally out of Wave 4 Triangle
I'm back to the $36.80 Wave 5 target for GE. The triangle kept converging after I though there had been a Wave 5 break out a few days ago.
Aire: Various Wave Count Thoughts
I have not studied Hurst cycles, only Elliott Waves. I should be able to master Hurst cycles since I've taken graduate courses in signal processing. My initial thought is there is a transform linking cycles and e-waves because there is an analogous transform between time response and frequency content in signals and systems.
I've given some thought to your question before you even posed it. The difference between indexes trends, waves, or cycles I believe has more to do with their grouping and investors opinions about the group. Wealth is a popularity contest, so stocks represent a spectrum of popularity. Investors try to group stocks with similar features together, such as fundamentals. From a socionomic point of view, mood drives earnings, so grouping stocks with similar fundaments is the same as groupign stocks by the same mood.
This weekend I will post a comment about the use of advanced mathematics in technical analysis.
Aire: Ignoring External Events
Yup, strict elliott wave analysis says to ignore the external events. I reconsidered my wave counts. When the SAP closed on Monday, it was a thrust and the entusiasm could have continued into after hours to the projected level of 1184.
Things make much more sense using 1184 as the starting point for hourly wave 3-1-1 leading diagonal that dropped 24 points to 1160. Afterwards was an hourly wave 3-1-2 expanding flat that has retraced 50% into the close. Wave b of the flat ended at the low of the day.
This looks much better now.
SAP, Huh?
Hourly wave 1 from yesterday's opening looks like it ended this morning around 11:15 at 1160 as a leading diagonal. Since then an hourly wave 2 flat unfolded. hourly wave 2 target price is 1169.5, a 50% fibonnaci retracement. We'll see, The FED may have stepped in an manipulated the market during the Capitol evacuation. Look at the M3 reports this weekend to see how much the money supply expanded.
SAP hourly wave 3-2 top?
1168.23 was the target for a 50% retracement of hourly wave 3-1. I think the German DAX did a double zigzag as a holding pattern before the US markets opened. It makes sense since the DAX has been relatively stronger than the US markets.
No Gap Down Today.
US Market futures are up.
The German DAX is forming what looks like a double zigzag. US markets have a single zigzag, so a second zigzag could cause sideways movement as long as there is a time delay in German and American investor mood.
Today's wave count DOW and SAP.
Hourly Wave 1
Hourly Wave 2
Hourly Wave 3-1 nearly complete
Hourly Wave 3-2 Should rally into close.
Tomorrow would be Hourly Wave 3-3. This means the potential for a gap on the daily chart is highly likely. With a second gap down day, the selling pressure should grow rapidly.
Short at the close or if your see a clear zigzag into the close.
GE: Sell at $36.00
It still leaves a few pennies of upside for bulls to get trapped in this brief wave 2 rally. After that another 50c drop is likely.
SP500 Futures DOWN 7.6
Futures indicate a complete retracement of the late afternoon rally. If the futures turn out to be accurate, then a top is in place. Looking at other action, the German DAX sold off hard (1%), confirming the end of Large Wave 2.
Airedale: Yes, Symmetrical Triangle
That's the best bet. The debate as to the DOW target of 10492 is still debatable since the SAP is so close to its target of 1184.
UTX and GE need a little more time (2-3 days) to rally.
SP500 Began Fall Off a Cliff at 2PM
http://finance.yahoo.com/q/bc?s=%5EGSPC&t=1d&l=on&z=l&q=l&c=
Five waves UP from morning's LOWS' SELL!
I jumped the gun this morning. All indexes since then have rallied a nearly complete Elliott wave.
SP500 is closer to the fibonacci turning level than the DOW. It means the Dow is relatively weaker in terms of price as the chart pattern is the same. Even then, the SAP may not reach the 1184 target. Use the SP 500 as a guide for the market turn.
Market is too weak. SELL!!!
It looks like there is not enough momentum to carry the markets to the fibonacci levels I mentioned this weekend without violating Ewave rules. This could get ugly fast since one of the DOW leaders, UTX, formed an ending diagonal over the last 2+ years and its wave 5 may have truncated.
GE E-wave Count
I've had a slight change in my wave count. The wave count looks better with Wave C-5-4 taking place from mid $37.51 in Dec '04 to $35.02 in early April '05.
http://stockcharts.com/def/servlet/SC.web?c=ge,uu[w,a]dacayyay[dc][pb50!d20,2!f][vc60][iLp14,3,3!La1...
Since then Wave C-5-5 has been unfolding as an ending diagonal.
http://charts.barchart.com/chart.asp?sym=GE&data=Z60&date=050805&den=HIGH&evnt=ADV&a...
Below is the breakdown of the ending diagonal:
wave 5a from 35.02 to 36.49 Zig-Zag
wave 5b from 36.49 to 35.35 Zig-Zag
wave 5c from 35.35 to 36.60 Zig-Zag
wave 5d from 36.60 to 35.61 Triangle
wave 5e from 35.80 to 36.86 Target Price
This target price of $36.86 is clearly below $37.51. This indicates there will be truncation in addition to the ending diagonal. This forecasts the reversal will be quick. The move to the downside could be even faster if wave 5e of the ending diagonal also truncates.
Other technical indicators:
The stochastics have formed a triangle and is near the tip. The reading is also near the overbought levels. This indicates a downtrend is in the near future.
Bollinger bands have been fairly close the last 4 months. When they both open, it will indicate a dramatic move.
MACD has been hovering around neutral. This past week the average dropped below the signal indicating a top. With the choppy trading the last 4 months, crossing the signal has been an unreliable indicator.
GE strategy:
Don't buy long!!!
If the price leaves the $35.50 to $36.60 range, SELL!
Weekly SAP and DOW Elliott Wave Counts
This weekend's commentary on the SAP Elliott Wave count should be intriguing, since there are two equally valid Elliott wave counts. Both wave counts indicate a dramatic price drop is ahead.
http://stockcharts.com/def/servlet/SC.web?c=$spx,uu[w,a]dacayyay[db][pb50!d20,2!f][vc60][iLp14,3,3!L...
The First count is an update from last week
Large Wave 1 from 1229.1 to 1163.7
Large Wave 2 from 1163.7 to 1191.9 a 43% retracement of Large Wave 1
Large Wave 3-1 from 1191.9 to 1136.2
Large Wave 3-2 from 1136.2 to 1179.646 a 78% retracement of Large Wave 3-1
The Second count
Large Wave 1 from 1229.1 to 1136.2
Large Wave 2 estimated from 1136.2 to 1182.65 a 50% percent retracement and 37.5% time of Large Wave 1.
http://charts.barchart.com/chart.asp?sym=$inx&data=Z15&date=050705&den=HIGH&evnt=ADV...
There is still some potential upside left for Monday to complete Larger Wave 2-c. The difference is Small Wave 2 from 1163.7 to 1190 is a zigzag with a flat connecting the zig and zag, and Small Wave 5 from 1156 to 1136.2 is not part of Large Wave 3-1 of the first count. Let's examine the Elliot Waves for Large Wave 2 zig-zag. Large Wave 2-a zig was a leading diagonal. This indicates a great deal of hesitation off the bottom. Large Wave 2-b was also zig-zag. It retraced most of Large Wave 2-a, indicating there is still a great deal of fear in the market. Large Wave 2-c zag was and extended wave. After the triple bottom, investors went on a buying frenzy. This is the perfect emotional set up for a reversal. Everybody now feels invincible. Large Wave 2-c is nearly done. It looks like Large Wave 2-c-4 is a triangle that may have finished. Clearly the late day trading broke well below the lower trendline. Often there is a little break before moving higher. This break looks disproportional, but still allows for one final move up.
Monday's game plan is to sell all long positions at the open. If you want to short, wait for the price to leave a the 1166 - 1178 range for indication of a new multi week downtrend. A break below 1155 is sufficient to confirm the beginning of a new multi week downtrend. Large Wave 2-c-5 being finished today is debatable.
I prefer the second count. The time and price retracement of Large wave 2 are both Fibonacci relationships, very harmonic.
In the first count Large Wave 3-2 has a 78% retracement that is inconsistent with a Large Wave 2's 43% retracement. Large Wave 3-2 should retrace less than or equal the percentage of Large Wave 2 to indicate increasing fear in the market. The 43% retracement is between fibonacci levels of 38.2% and 50%, which is not a good theoretical fit.
Using the second wave count Large Wave 3 target levels over the next 2 or 3 months are:
1032.3378 = Larger Wave 1 * 1.618 = 12.7% drop. Preferred since it is near the beginning level of the previous Large Wave 5 that started at 1060.7 in August '04.
996.85 = Larger Wave 1 * 2
The wave count for the Dow is similar to the SAP500 using different numbers. The wave 2 retracement percentage for the Dow is 41.1% so far. This is between fibonacci levels of 38% and 50%, which opens the debate of whether the Dow will rally nearly 150 points to the 50% retracement at 10400. The argument for another rally is that the SAP could still move 12 points to its 50% retracement at 1182.65. Advances in both the indexes convey similar investor mood.
http://stockcharts.com/def/servlet/SC.web?c=$indu,uu[w,a]dacayyay[db][pb50!d20,2!f][vc60][iLp14,3,3!...
http://charts.barchart.com/chart.asp?sym=$indu&data=Z15&date=050705&den=HIGH&evnt=AD...
Large Wave 1 from 10984.5 to 10000.5 is a move of 984 points
Large Wave 2 present from 10000.5 to 10405.8 is a move of 405.3 points and 41.2% retracement of Large Wave 1
Large wave 2 estimated from 10000.5 to 10492.5 is a move of 492.5 points and 50% retracement of Large Wave 1
Using the end of the estimated Larger Wave 2, Large Wave 3 target levels over the next 2 or 3 months are:
8900 = Larger Wave 1 * 1.618 = 16% drop. Preferred since it is near the topping points in August '03 and December '03 of 9050.
8524 = Larger Wave 1 * 2
Monday's game plan is to sell all long positions at the open. If you want to short, wait for the Dow to leave a the 10300 - 10400 range for indication of a new multi week downtrend. A break below 10250 is sufficient to confirm the beginning of a new multi week downtrend. Large Wave 2-c-5 being finished today is debatable.
Place SAP500 stops at 1171.
The anticipated rally may be truncating or just part of a flat between zig and zag in wave 5 of 5
SP500 To Rally Into Close
Last friday started wave c of 2 of 3. This is a motive wave, so there are 5 smaller waves. Noon yesterday began what looks like a textbook symmetrical triangle in the wave 4 position. Wave 5 probably started and should complete into the close. Wave 5's following a triangle are generally very quick risers.
Moday begins a new downtrend.
SELL THIS RALLY!!!
http://bigcharts.marketwatch.com/intchart/frames/frames.asp?symb=sp500&time=&freq=
Airdale88: cycles and E-waves
Figures 4 and 9 show the SAP500 e-wave and cycles, respectively. Are those time measurements cycles?
Link to Ewaves and Cycles
Hot off the press. This article shows both E-waves and Cycle for the US markets. Now I'll be able to see how cycles and E-waves relate.
http://www.safehaven.com/article-3021.htm
SELL IBM!!!
The pop and drop at the opening was $1 short of my targets, and the price has dropped to yesterday's close. Elliott waves indicate this was probably an extended wave 5, not an extended wave 3. Extended wave 5's are followed by wave 1's down that sharp and find support at the base of the previous wave 5 up.
This is exactly what happened.
IBM is a closely followed stock that this spike and pullback should not be taken simply as noise as one would with penny stocks.
IBM upstages GM Today
The announcement of 13,000 job cuts has sent IBM's premarket price higher $1.26 to $78.34. There is still some upside potential. The center of the 20 day avg is $78.74. There is also a gap to the downside that may be closed.
http://stockcharts.com/def/servlet/SC.web?c=IBM,uu[w,a]dacayyay[dc][pb20!d20,2!f][vc60][iLp14,3,3!La...
The bounce of the April '05 lows is a corrective elliott wave, most likely a zig-zag. The zag is still in the early stage.
The zig was $5, so the zag could be a fibonacci retracement of $3 or $5. That gives a target price range of $79 to $81.
http://charts.barchart.com/chart.asp?sym=IBM&data=Z15&date=050505&den=HIGH&evnt=ADV&...