Monday, July 16, 2007

 

EWI sees it the same way


I thought I would share this with you to show you that Elliott Wave International sees the wave count, at least in the short term, the same as I did when I said this rally which began on March 14th was started by two waves 1 and 2. They seem confident that the wave four triangle was a correction within this wave structure. I still not but it would make predicting what's next easier.

So the big question is what now? So far this 500 point rally which has taken less than a week is still looking good. Support is 13,700: the top of the triangle. If we trade below that I will have to consider a major correction is underway. If EWI is right then wave 5 should be ending soon and we should at least be correcting the rally from March 14th which is 2,079 points to date.

But let's not get ahead of ourselves. Just remember, I am thinking like an investor. If I was trading I would try and get short much sooner with a quick stop. Investors want to be very sure that the market is making a large change in trend before they act because it is easier to get whipped around and lose money from short moves of no significance if you try and pick tops and bottoms before they are clearer established. That being said there has been no reason to be short right now.

Answering Higman's question:

Kev, Tony's wave count of the S&P 500 has a the index as an impulse wave, opposite of a correction, since the end of 2003. Nothing wrong with that. Elliott Wave International thinks that the rally from 2003 is part of bear market. Caldero's view holds more water in my opinion. In many cases involving Elliott waves, especially long term counts, there are many valid possibilities. One thing to note, both Caldero and EWI don't see much more left before the pattern that began in 2003 ends. When that happens a correction of this rally is the least amount of a bear we should see. A correction of almost 7,000 points to date.

So the technical picture isn't crystal clear but we are closer to the end of this rally than the beginning. After the correction begins we can start to judge how far it will go.

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