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This post by Daneric40 has been promoted from StockTock Social.
I have labeled this wave as an extended wave per Elliott Wave Principle. It only makes sense. The wave performed what appears to be 3 series of “1 and ‘2″ waves in the mid to lower 800 range in an attempt to rescue the markets.
Once it failed, a swift move and whipsaws to the downside occur. These are the 3 and 4 waves playing out. Anyone that has followed my waves can see my Sept – Oct down waves labeled as an extended wave. They are somewhat predictable if they are labeled correctly.
Today’s breakaway gap indicates may in fact mark the “middle” of the wave.
Trendlines very much come into play here at many stages. Use them when connecting 1 3 and 5 waves.
I show potential for perhaps some early weakness if the pink wave trendlines were not hit, its hard to tell. It appears there is some unfinished waves from the end of day dropoff. It could still be tracing out a mini wave 4 (from 820 peak) and then a drop to hit the lower pink trendline. So the longer the mini wave 4 takes to play out, the lower it might drop because the trendline moves lower as time goes on. 730 sound ok? I’m guessing.
After that I see a big rally toward the peak of the previous wave 4 which was 819. I do give tomorrow the benefit of the doubt for a nice rally for OPEX Friday. Usually the whipsaw waves do not make it back to the previous peak but this one may. Any rally higher than 820 would lead me to believe that capitulation had occurred.
If this is an extended wave, I show it having one more massive drop in store. that would be saved for BLACK MONDAY, HAHAHA!
Either way, there will be time over the weekend to evaluate that kind of data.
But regardless of the case, blue wave 4 or true capitulation, I am calling for a rally tomorrow to wave 4 apex area so it should clear back toward over 800 at least.
I do however favor a capitulation target of 700 or so and soon. See my long term chart connecting the Major wave 3 sub waves. It points toward 700 area next Monday/Tuesday. But the longer capitulation takes to play out and the more time that passes, the lower the trendline target becomes.
That is why continued bullishness only results in lower and lower targets as more time passes on.
That first chart made me smile.
Thanks for your hard work. It feeds my family.
Just my opinion……
World market decoupling is making EW susbstantially unrealiable except for intraday small moves. Holy Moly – After today’s Dow disaster, Hang Seng is up 4.94% at 11:30pm EST – right now! Is that a good thing?….no. They are saying they don’t need us anymore….this really is a new occurance.
My point is that more than ever before we need to be careful with trades base on EW for longer than a day. Global relavance is the tidal wave that you don’t see coming.
November 21st, 2008 at 9:50 am
Tom,
I agree that the fact that the foreign markets are up after a U.S. plunge is new and signals that they may not be as reliant on us (although we are still extremely important to their economies) However, I don’t think that this would limit the effectiveness of an EW analysis. EW has nothing to do with fundamentals, it is just looking at the prices patterns of the chart.
Dare to deam!……but no, I suspect Asian markets will not decouple from the US in my lifetime…….e.g. Australian market was down all morning following the US close but then in the late afternoon rallied strongly…….but all in the anticipation of a US bounce-back following the Citi announcement.
Your prophecy was fulfilled. We could move higher Monday (one last fakeout to 820) and sell-off to complete the move.