Tuesday, October 6, 2015

Mission Accomplished, Commander

In our last post, we posited that it was possible in the light trading volume and general confusion of Elliott Wave counts, for the large players in the market to turn the trading algorithms on in a quasi Search and Destroy mission that was designed to fill the upward gaps in the price chart.

We are happy to report today, that the last upward gap, since the Fed meeting, has now been filled. In the chart, below, all of the upward gaps have been turned to green. Mission Accomplished!

SP500 Hourly All Gaps Since Fed Meeting Filled

The Elliott Wave count is a 'plausible' count. We do not suggest it is the 'only' count. It is, after all, possible, given the internal market breadth ratios, that (a), (b), (c), up, is only (i), (ii), (iii), up. And, if so, we will further adjust our market view. But, we do want to note that price has retraced to slightly beyond the 78.6% retracement level. This would be very acceptable for a second wave in a diagonal count, and 'at present' we see only "three waves up" with the hourly slow stochastic over-bought. A roll-over below 80 on this indicator would be interesting for the downward count.

Still, we must keep our eye not only on the SP500, but on the Dow. If the Dow trades above it's recent September high of 16,933, then we must remove a downward diagonal from consideration and look at other sideways or upward counts. That is simply the nature of Elliott Wave counting, and we will adjust accordingly if that happens. So far, the Dow has not invalidated a downward count.

One of the reasons why we remain very tentative on the Elliott Wave position of the market, is that not only are there the downward gaps remaining, that you still see as red circles on the chart, but there are also upward gaps from August that have not been filled yet, either. Which fill or fills first will be interesting in and of itself.

Cheers and enjoy the chart!