Elliott Wave Studies Continued

We have now reached the 61.8% Fibonacci retracement & medium moving averages at 1108-1110. Also note that we had a higher high Thursday which confirmed that objective wave 3 completed at the February 5 low and that wave 4 is underway. Furthermore, the move upwards has now exceeded the objective wave 2 high. In both Elliott and DeMark Objective wave work wave 4 is not allowed to exceed the end of wave 2.

DeMark’s method to deal with this situation is to assume that wave 2 has not yet completed. That is, the entire move from the January 29 low until now is all part of wave 2. This type of pattern would be classified as an Expanded Flat (see January 27 posting). The other possibility is that the waves labeled 1-2-3 are really a complete a-b-c corrective pattern.

I have my own set of tools to use when conducting Elliott analysis and will begin to introduce them now. Today’s chart shows three of the tools: price fractals (denoted by the diamonds) and price CITs (denoted by the green circles) are the building blocks. CIT stands for Change In Trend. I then draw a trendline connecting the last two price fractal highs. When that trendline is broken it is a good (not absolute) indication that an Elliott Wave has completed.

So. What Elliott Wave has completed? More to follow in the next post.

Support Has Held - At Least For Now

After failing to confirm the close below the weekly TDST support line; and failing to even close below the daily TDST support line, the cash S&P500 has rallied. There is a reason they are called SUPPORT lines!! We have now made a swing chart (orange line) bottom on the daily chart and have turned up.

Going forward note how the 50% and 61.8% Fibonacci retracement lines mesh with the long and medium moving averages at 1096-1097 and 1108-1110 respectively. Watch for possible resistance at these levels. Also note that a higher high today will confirm that objective wave 3 completed at the February 5 low. We will talk further about that should it happen.

Bottom Line: We remain in waiting mode; waiting to see if the 1044.5 level will be broken to the downside by February 26.

Weekly Chart Short Still Not Triggered

After falling (and closing) below the TDST support line the cash S&P500 found support at the medium moving average. Over the past week we bounced without breaking below the previous weeks low. This means that a short sale was never triggered. We have two more weeks to break below 1044.50 before the support line break is disqualified.

One other item of note on this chart. Note that this is the first time that the swing chart (orange line) has turned down since the March 2009 bottom.

As you can see the trading system as developed is not for short term trading. We continue to wait for our first trade execution! It has been said that patience is the hardest part of the game.