Weekend Update #1

SOYBEANS The magical fruit has put us in a bind. It broke through critical resistance levels, most importantly, the 6/11 H at 1099.

That is a rule breaker. Wave 2 can not retrace more than wave 1. The price action down to the 871 L can only be corrective. b apparently needs additional work.

There are two scenarios I show to accomplish this:

1.) Primary [C] has not completed (count on chart). This would entail intermediate (3) finishing at the 1099 H, while (4) finished at the 871 L. [C] would then be completed at the conclusion of this set of minor waves, which appears close.

A couple of issues come with this interpretation. (4) enters the price territory of (1), however, not on a close basis. Additionally, the size and scope look way out of proportion compared to (2), in fact, it rivals primary [B] in price and time.

2.) Primary [C] completed at the 1099 H - as in my original count. The 871 L finished a primary [X] wave (alternate count). This means that beans would be tracing a double zigzag.

This is totally counter to what the other grain markets are doing.

This is a chart of the September Composite contract. Notice it has not taken out the 6/11 H. The November contract has the same structure. The chart above is the continuous contract.

See the dilemma were faced with? Perhaps the continuous contract is front-running what will eventually happen to the near month eventually. I'm not real sure folks.

For this reason and the fact that the rest of the grain markets are decidedly bearish, I have adopted the imperfect count of primary [C] not completing as of yet. I'm blaming the Chinese for buying up all the beans and causing this mess.

As mentioned above, it appears that minor 5 should be completing very soon. Here is a look at the subwaves.

As noted on the chart, 5 = 1 at 11170. The 61.8% projection of 1-3 comes in at 11812.








WHEAT The wheat market pushed hard to the downside after finishing its primary [4]th. In the process, wheat made new multi-year lows.

Last week I mentioned that there was a trend line connecting the 12/5/08 L and the 4/20/09 L that should provide resistance on the counter-trend rally. It did not disappoint. There was also the 127.2% projection of (A) in the same spot.

We should expect to see 5 intermediate waves down that will complete a very important bottom. I would not be surprised to see [5] extend.

The minimum objective would be the 61.8% of [1] - [3] at 437.50. I suspect we will see much lower price than that.


CORN The corn market pushed hard to the downside like wheat.

Price reached the 38.2% retracement level, which is a common retracement level for a 4th wave, before being turned back. Also, notice the nice alternation with wave [2].

At this stage, price action needs to take out the 304 L, which I'm confident will happen. Downside targets include 270, which is the 61.8% projection of [1] - [3] . The 2:1 of a sits at 266.50.

5 intermediate waves down will complete an important bottom.

Fed Laundering Money through the Big Banks Into the Stock Market

Crude

Crude closed flat today on slightly better than average volume. Range was $2.24.

Crude needs to move on out of this congestion. I'm not thrilled with the amount of time it has taken to trace this wave (iv). Perhaps it has finally finished (iv), although it is to early to determine that.

I do not want price action to break the base channel (right above z). That means it needs to go now. If this isn't the start of (v), I'm going to be concerned with the count.

It is also possible that (iv) finished where I have sub-minuette y. That would mean that there was an expanded flat for ii, which would end where z is. I know, looks like crap, that's why it's an alternate.

We will just have to see what price action brings tomorrow.

ES

Back to back negative closes - that's unusual. Range was 18 points and volume came in lighter than the previous session.

The topping process may have concluded. It appears that we traced out an expanding flat after the completion of the [v] ending diagonal. I believe it counts best this way, although, you could make a case for [v] finishing at this mornings 1007.75 H.

If further price structure tells me the Orthodox high is 1007.75, I will make the necessary changes. (c) may have possibly completed already, thus completing [a] with it. It is also possible that today's action finished a sub-minuette i and we are in the process of tracing ii of v to finish (c). The degree's can be tricky at times.

In either case, we should see some retracement here with more downside pressure following. My guess at this point is that minor B will be fairly shallow and more than likely wrapping up within a week or so. This is just my guess based on structure so far.

Targets to the downside include the 23.6% of A at 972 and the 38.2% at 951.50. I'm hoping for the mid 960's where I have a couple 261.8% projections and of course the 4th of lesser.

The new 1 bar daily projection (yesterdays was negated) comes in at 960.50.

Another day of distribution.

Did you guys see where Prechter is recommending laying on a short line again.

"If you actively invest in the stock market with money you can afford to put at risk, it's time to return to the short side. It may be early in terms of both price and time...you can return to half of your former holdings."

He is saying you can take a 1/2 position currently and scale in the rest if we have higher prices. He issued his monthly Elliott Wave Theorist early to get this out.

I have to agree with him that it may be early in both price and time. But you never know.

Dollar Index

Wanted you to be aware of a potentially important development that may be taking place in the dollar.

It appears that we may have finished minor 5 down, which would complete (C) . We clearly have a clean 5 wave structure off the low. I'm not sure what the big huge candle is from.

The Daily Sentiment Index is currently at 3% bulls. As stated in the weekend update, this market was very close to completing an important bottom. It might have done that today.

This will effect other markets. Keep an eye on the dollar tomorrow.

Crude

Crude finished up $.55 on better than average volume. Range was $2.39.

Crude continued to consolidate in what I have labeled minuette (iv). The 69.71 L may have marked the end of this corrective wave with a little more than a 25% retracement of (iii). It's not real clean coming up out of that low, so the jury is still out.

The complex nature of (iv) was expected based on alternation with (ii), which was a beautiful zigzag. Also, if you remember, Friday was a cycle peak on the daily (KoolsTools). That worked like a charm.

Tomorrow should be a little cycle low day. There is a nice cycle peak due 8 trading days from today, or Monday the 17th.

Should this (iv) not be complete, the retracement levels are on the chart.

As always - I may be completely wrong in my interpretation of structure.

Edit: forgot to mention that tonight is a full moon fwiw.

ES

ES finished the day down for a change. We had range of 15.25 handles and volume was a smidge better than yesterday.

Well, we didn't get up the 78.6% level at 1010.50 as I had hoped, but we did tick the 61.8% at 1006.50. It appears that we have finished the diagonal, thus completing A .

I would love to say we have started impulsing down, but unfortunately I can't. The best way to count this is as a three. It looks like we are tracing a flat for minute [a], with (a) and (b) complete. This also means that minor B will take the form of a flat or triangle. This of course assumes that we have in fact completed A.

(a)(b)=(c)(d) at 988.50. We had a 78.6% retracement for (b), so I will make an assumption that we make it to the 127.2% projection at 984.25. The one bar daily projection = 966.50. This fits in with the 4th of lesser. Maybe (c) gets some extension and we make it down that far.

There were three beautiful trade setups today, which are noted by the red circles. The breaking of the diagonal boundary around 1000 should have been a no-brainer sell. You easily should have gotten 5-6 handles, depending on entry and exit.

In the next setup you should have been buying around the 991.50 area for at least a tradable bounce. There was a confluence of fib numbers, completed wave structure, and the wolfe wave 1-4 target (red line).

I did not specifically make mention of the wolfe wave in last nights update, but if you go back and look at the chart you will see this target line.

The third setup was a backtest of the broken diagonal boundary line. Although not shown, this also coincided with the 78.6% retrace of (a)'s leg. A perfect place to sell this pig.


The big lotter's distributed today - finishing down about -44k net. The smallies must have been seeing that no-brainer buy level with me. They started buying and didn't quit.

If I'm correct about structure, they are going to wish the had unloaded up there at 1004. So, the bigs sold and the smalls bought. One of them is going to be right - wonder who that will be?

On a side note, anybody notice the NQ under performance the last two days? That's not bullish folks. Nor is the hanging man candle the SPX put in.

ES

Es overcame early weakness to finish positive - thanks to the eod ramp. Range was 13 handles and volume was slightly better than yesterday, but still below average.

Anybody who looks at a chart can tell you that we are wedging. I posted a chart earlier showing the ending diagonal and this is the same chart updated.

Whenever you have overlapping waves that are unclear and confusing, you are correcting in some fashion. That's exactly what a diagonal is - a correction that makes progress (up or down).

If my assessment of structure is correct, we will more than likely complete the current pattern soon...like tomorrow or Thursday. This will finally complete minor A (hopefully).

I suspect that we will see "throw-over" and (e), or (v) if you choose, will break the upper boundary line. The number I will be keying on is the 1010.50 level.

This is the 78.6% projection of (c), as well as, the 200% extension of (c)(d). Notice that the (c) leg ticked (a)'s 78.6% projection. There is no guarantee that price gets that high, or is it a requirement of any kind.

What we don't want to happen is for price to print 1015.75. Doing so, negates this pattern as (c), or (iii) if you choose, becomes the shortest wave. That's a rule breaker folks. It also starts VO scratching his head trying to figure this BS out.

Just get done with A already...geez. The never ending A leg. That's what happens when you have a manufactured rally.

This is a comprehensive look at the entire structure up from the 865.25 L. The July 15th gap is the yellow highlight.

The blue retracements assume that price gets to 1010.50. Wherever and whenever A completes, I will adjust the fib ratios as needed.

I'm hoping at least they can get it back to the 4th of lesser around the red 965.25.

We have nice divergence - which is not unexpected.

The smallies, collectively, were not committed to buying this pig today.

Crude

Crude basically finished flat today. Range shrank considerably, but still a respectable $1.79, as would be expected when a 4 wave traces.

Based on the size and scope of this retracement, I have labeled the 72.20 H as minuette (iii) and this retracement as wave (iv).

I'm not sure if (iv) has completed or not. We had a bunch of overlapping three's coming off the 70.16 L. It might be a leading diagonal, which would be i of (v) or perhaps an ending diagonal that finished (v) and thus [c].

An additional option is that minuette (iv) is still tracing and that mess could be an x wave. We should find out more concrete answers in tomorrow's trade.

My guess is that (v) has not completed. If that is the case, we should expect upside pressure tomorrow. (i) = (v) at 75.25. The 61.8% projection of (i) = 73.31.

Since (iii) did not appear to extend, there is always the chance that (v) will. This is very common in commodities as opposed to equity's who generally extend their 3rd.

There is also an outside chance that the 72.20 H completed iii. That would basically flunk the proportionality test, so I give it low odds.

ES

This is what I'm looking at currently. This structure appears to be an ending diagonal for the minute [v].

The 78.6% projection would be a perfect spot for completion. This would entail a move over the boundary line, which is known as "throw-over", as pointed out on p. 38 in Elliott Wave Principle.

"A rising ending diagonal is usually followed by a sharp decline retracing back to the level where it began and typically much further.", p. 38 Elliott Wave Principle

If price prints 1015.75 then this pattern is not valid, as this would make wave (iii) the shortest.

Here is what the Ensign Map is forecasting. It has been spot on so far today.

That should change if this diagonal finishes tracing.

Crude

Crude continues to power higher, closing up another couple of bucks.

It appears that something finished at 72.20. I show sub-minuette iii, however, it very well could be minuette (iii). Since this is more than likely a 4th, regardless of degree, be on the lookout for a triangle.

72.20 was the 261.8% projection of i . A perfect fib relationship for iii to complete. 72.16 was the 141.4% projection of (i) . I have placed the retracement ratio's on the chart.

When this retracement completes either tonight or tomorrow, I will be expecting higher prices still. Minute [a] = [c] at 72.40. Other nearby targets are the 88.6% retracement from the high at 72.91, and the 161.8% projection of (1) sits at 73.16.

Once this degree retracement takes place we should be able to draw a new channel.

ES

ES finished higher for the 13th out of the last 16 sessions and closing over 1,000. Range was 19.25 points, while volume finished lower for the second consecutive day with a higher price close. They are handing the torch off to someone - hope it's not you.

What a mess of confusing waves. There are several possible counts and all have issues. We either completed minor A at the 994 H, or we are working on it now.

Who knows. I still favor the completed A scenario for now, which would mean we are tracing out an expanded flat. I have previously discussed that an expanded flat would make a whole lot of sense to me.

If correct, minuette (a) finished at the 978.25 L. (b) looks to be completing very soon, in what might be an ending diagonal. Whether its an ending or leading, ES is definitely wedging (again).

As mentioned above, the waves are a wreck and there are lots of other options. Lets see what tomorrow brings.

Surprisingly, I have the 100 lotter's finishing barely above break-even. Seems strange on a day where the market was up 16.25 handles...or does it!?

Chart courtesy of our friend Jim Kane at www.kanetrading.com.

TNX is his Chart of the Month. He also just posted his monthly commentary.

For those of you who are not aware of Jim and the important work he has done, I highly encourage you to check out his website. I use the all important 88.6% ratio because Jim derived and quantified it.

While your over there, check out his article titled "The Critical Elements of a Trade".

Soybean addendum

This is a look at the subwaves. I believe that beans completed a running triangle (p. 49-50, Figure 1-43, Elliott Wave Principle).

This is a beautiful structure with nice fib relationships. Notice the gap over minor A, in what's known as "the point of recognition." This happens in the 3rd of a 3rd wave, in this case (iii) of [iii].

Wave [i] equality is at 10590. It would be nice to complete C at that level.

Remember, in order to maintain a bearish count, price needs to finish this counter-trend rally fairly soon.

This is the September contract. The daily chart posted below is of the continuous. There are slight differences in price.

For you beginners, this is a great learning chart.