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Registered User
Joined: 12/19/2004
Posts: 457
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Things are not looking very good for the market at this point.
With the sell off in all of the major indices, I decided to take a look at the monthly charts, just to see what is going on.
DOW: Looking at the monthly (log scale), I can see a rare diamond formation, which has bearish implications.
SP-500: The action from 2004-2005 forms a rising wedge, which suggests a sharp sell off on completion. Elliott Wave also recognizes a specific form of a rising (or falling) wedge called an Ending diagonal or diagonal triangle. I see this diagonal triangle nearing completion in the next few months at most, if not sooner. From there, the sell off is likely to be sharp and swift.
COMPQX: Probably the least bearish of the three, as it is forming an ascending triangle. But I suspect this pattern will fail, and the breakout will be on the downside. Elliott wave also recognizes patterns such as ascending triangles, but the count also suggests a downside breakout.
Media General Industry Groups: I'm seeing an assortment of bearish patterns: Head and Shoulder tops, rising wedges, etc. in the sectors that would suggest economic growth.
The market just doesn't seem happy with growth prospects, despite the numbers. Looking at YTD advance/declines for this watchlist, you will see that most sectors of the market have advanced. That was surprising to me. But the markets haven't moved much.
Breadth: Comparing the Russell 3000 to the Worden 200 day diffusion index (T2107--% above 200 day moving avg), you will see a clear downtrend in breadth and a clear uptrend in the market.
There have been three higher highs in the index, and 3 lower highs and 2 lower lows in the breadth indicator. This breadth indicator is lower now than it was at the 2004 bottom.
Can anyone find anything good, technically speaking, about the market? I can't.
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Registered User
Joined: 7/1/2005
Posts: 20
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The Diamond shape development was mentioned by Elliotwave Internaitonal forecast (9/30)and subsequently discussed by Peter Brimelow in his MarketWatch column (10/3 and 10/20). Dow is in intermediate wave 3 of primary 3 in EWI's count. Once down under 10,000, you know the story.
The S&P500 finally reached 50% Fibonacci retraction (1204)yesterday and started down again in wave 3 of 3 down trend. Since down under 1174, the next target support is about 1150-1140.
It seems social mood has turned and confidence level is at record low. On the other hand, market can just turn around.
Market is always right.
Trick-Or-Treat?
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Registered User
Joined: 12/19/2004
Posts: 457
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I don't necessarily agree with those wave counts by EWI. I prefer to do my own work.
Who knows what the future will bring, but I can see the market holding above the recent October low. But any upside potential is strictly limitted.
I took a look at the Russell 2000 after my first post. I find a wedge also forming there as well.
Nothing looks good. When the market eventually breaks, it will be pretty ugly.
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Registered User
Joined: 5/17/2005
Posts: 221
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it's coming ...... that break down in the market that evryine keeps talking about. It is just a case of when.
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Registered User
Joined: 10/7/2004
Posts: 2,126
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Well folks I hate to come across in this way, but my original post on 9/16/05, already told you what you are finding out now. I didn't need Fibonacci, Elliot, or Pizarelli, or Da Vinci. Just price and volume, and the reality of the near future. Isn't simplicity simply beautiful.
It is a little late to come to this conclusion now. In fact I was kind of late back in Sep 16. Things have not look good for the market in a long time. I advise you to look at my latest posts, and watch for April's lows. Support and resistant are all within the price and the meaning. Be very aware of the 2000 level in the Nasdaq. The market is oversold, buy it has been oversold for a while now, and can continue that way for a long long time. As long as April's lows are not taken down, your primary will not change. But if it does which is probable, watch out.
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