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October 10th, 2014: SP-500 EOD Update

Posted by pugsma on October 10, 2014

6:00 pm EST:  Today saw the Nasdaq break its August low of 4325 and its 200-day SMA of 4300 and close at 4276.  The SP-500 and DJIA should now follow the Nasdaq low and break their respective (16,350 and 1905) August lows.

I posted this in the comments section early today in order to give everyone some perspective was what we should expect from a Primary degree wave 4 (P4).

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pugsma said

Elliott Wave TA is based on defined price rules and investor/trader sentiment. Most here understand the price rules fairly well at this point, but what about sentiment?

So a couple points of emphasis this morning:

1) Price: From an E-wave price perspective, a Primary 4 (P4) degree wave needs a moderate amount (23% fib retracement) of price and time retracement. If we look at P3 is was the 35 month move up from the P2 low at 1075 in early October 2011 to 2019 in September 2014. So a 23% fib retracement in price is 0.23(2019-1075) = 217 points. Subtracting 217 from 2019 we get the P4 price target of 1802. For time we have 0.23(35 months) = 8 months. September 2014 + 8 months is May 2015. This time requirement is why I think P4 might become a large triangle wave with this first move down as only major [A]-P4 and not all of P4.

2) Sentiment: From a long-term E-wave perspective sentiment is best tracked by the weekly AAII Investor Sentiment and NOT the daily Fear/Greed indicator. I have successfully used the weekly AAII Sentiment along with my E-wave price work to call key market bottoms. Right now as of Thursday, Oct 9th the AAII weekly sentiment survey was still running at 40% Bulls to 30% Bears. You can’t get a P4 bottom with 40% bulls on the weekly AAII sentiment. It needs to dip down into the 20% range.

Finally price has not tested the 200-day SMA (currently at 1905) or the weekly 50-week SMA (currently at 1886) for move than 2-years. That is testament to the strength of the P3-C1 wave up form the October 2011 low at 1075. However, do you really think a P4 correction will end with out at least testing those levels? Not likely. Plus, the Primary 5 (P5) wave will certainly not be very strong without the P4 wave price at least testing those levels and likely lower.  So I would stress to be patient with P4.

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The primary count is that the SP-500 is in a wave minor 3 of major [C]-P4-C1 from the minor 2 high today at 1935.  Minor 3 is likely headed for the minor 3 = 1.62*minor target of 1843.   From there should be a minor 4 bounce to 1864 before minor 5 of major [C]-P4-C1 completes at the minor 5=1 target of 1807.   There is also the major [C]=1.62*[A] target at 1819 and the 23% fib retrace of P3-C1 target at 1802.   Finally there is head and shoulders target at 1811 that should play out now the neckline of 1926 (avg 1915) was busted today.  So there is a lot of confluence of P4-C1 targets in the 1800 area.   This however, may only be major [A]-P4-C1 if P4 decides to form a triangle as discussed above and shown on the daily chart below.  The triangle will allow P4 to play out much long in time while not move lower that 1800 in price.  Of course there is also the 38% fib retrace of 1660, should P4-C1 price need to move lower that the 1800 initial target area.

The alternate (blue) count that P4-C1 is playing out as a simple flat or expanded flat with major [C]=1.62*[A] target at 1880 is still a possibility.  The 250-day SMA is at 1880 and the 50-week SMA is at 1885, so there is some support there along with the 1884 pivot area for a completion of P4-C1.  However, as mentioned above, this P4-C1 flat scenario does even meet the minimum price retrace of 23% to 1802 and it would have only lasted 3 months (since July), so I don’t give it a high probability at this point.  The primary count or some other variant of it is the most likely outcome for P4-C1.

Have an awesome weekend !

SP-500 15-min chart (EOD):

SP-500 15-min chart EOD 10-10-14

SP-500 60-min chart (EOD):

SP-500 60-min chart EOD 10-10-14

SP-500 4-hr chart (EOD):

SP-500 4-hr chart EOD 10-10-14

SP-500 daily chart (EOD):

SP-500 daily chart EOD 10-10-14

SP-500 weekly chart (EOD):

SP-500 weekly chart EOD 10-10-14

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