Weekend Update #2

30 YR BONDS
The downside pressure lasted all of two days before reversing and tracing what appears to be an impulse.

The key is that price took out the 121'11/32 H, though not on a close.

I have no idea what structure wants. There are minor degree labels on the chart along with a channel. Unfortunately, that's the best I can do until structure shows its hand.

If you put a gun to my head...I say price acts like it's not done going up. Just remember, I have been wrong on this market the last 137 times.

All prices basis continuous contract.

DOLLAR INDEX
Not unexpectedly, the dollar broke lower this past week.

Price action breached the 77.52 L, thereby confirming that intermediate (C) has unfinished business left.

76.325 becomes the next important level to watch. It appears that this minor 5th wave may be taking the form of an ending diagonal.

If so, wave [iii] needs to be shorter than wave [i]. In contracting ending diagonals, which this appears to be, wave 3 is always shorter than wave 1, and wave 5 is always shorter than wave 3 (p. 88, Elliott Wave Principle).

76.325 = wave [i] equality.

A nice marker to look for will be wave [iv], as it needs to complete in the price territory of [i] (p. 88, Elliott Wave Principle).

This is a look at the weekly chart.

I'm speculating that the 73.667 L completed a cycle degree a wave. It very well could be a c wave or something entirely different.

Regardless, this structure suggests that the dollar should see higher price once primary [B] has finished.

All prices basis continuous contract.

GOLD
The gold market continued higher this past week.

The beginning of this thrust out of the apparent triangle is sort of a mess to count, or more specifically, finding wave 1.

I show minuette degree labels, which I believe to be correct, but can not be certain of at this stage. Regardless of the degree, it does appear that we are near completion of 5 small waves up.

We nosed up to resistance around 1015 before backing off a bit. The 1028 and 1060 pivot highs are other levels that should be watched.

As stated last week, I believe the triangle was minor B of an intermediate (B) and we are in C up. The triangle target measures to 1076.80.

C = A at 1247.30, while C = 61.8% of A at 1126.60 (slightly different numbers that what I had previously posted).

From a cycle standpoint, Friday was a cycle low day (KoolsTools). This comes from the 2/20 and 6/3 dates. Price moving up into a low date is very bullish (and vice versa).

Perhaps we have a H-H-H cycle, much like crude with its L-L-L-L cycle. The next good peak day isn't for another week.

I'm currently long October 96 GLD calls.

All prices basis December contract.

Weekend Update - Grains

CORN
The corn market actually had a nice upside week.

It is unclear whether the 302 L finished minor 3. It is certainly possible, however, it is also possible that it was a minute degree low registered.

If so, then price may be setting up another [i] - [ii], as I have labeled on the chart. A very bearish scenario if correct.

There is key resistance at 334, the minor 2 high. Critical resistance resides at the intermediate (2) high at 339.75. Should price trade through that level, we would need to reassess the count.

I am concerned that RSI has a noticeable positive divergence. Perhaps it is just re-setting for the push down. Something to definitely pay attention to nevertheless.

We do have the potential for a cycle peak (KoolsTools) on Monday. This comes from the 7/22 and 8/17 lows. We did have a nice minor cycle low that came in on schedule on Tuesday. I had missed that in my analysis last week.

Bottom line - I'm still bearish this market. At this point, structure does not even remotely suggest that a bottom is in place. As I have mentioned numerous times, I look for price to find its way down to the 270's, and more likely lower.

All upside moves should be considered counter-trend until proven otherwise imo.

All prices basis continuous contract.

SOYBEANS
The bean market started the week out on a good note, however, it ended on a sour one.

To reiterate from week, it appears that the 1040 H completed primary [A] and we have started tracing [B] down. This should be followed by the final [C] leg of a double zigzag. This assumes my assessment of structure is correct.

Price supported on the base channel and 50% retracement level of [A]. When drilling down to smaller time frame, it appears that we should see lower price to finish [B], as it has taken the form of a zigzag.

There is a nice level of confluence lining up around 858.50. We have the (4)th of lesser, the 61.8% retracement of [A], and the channel all in that area.

Upon the completion of [B], upside targets are [Y] = [W] at 1263.75 and 1066.125, where [Y] = 61.8% of [W].

We have the potential for a cycle low (KoolsTools) on either Wednesday or Thursday. It is unclear if we should use 8/12 or 8/13 for the cycle, as they both had the same high. Perhaps this will give us the completion of [B].

All prices basis continuous contract.

WHEAT
The wheat market dropped hard on Tuesday before re-gaining some footing on Friday.

We shot through the minimum downside objective of primary [5] (465.75) with the move Tuesday. Price registered a low of 451, which just happened to be the 161.8% projection of minor 1.

It appears that minor 3 completed at that projection. If this is the case, then we should see price trace out a 4 before heading lower again.

It is also possible, much like corn, that price finished a minute degree low and is setting up a [i] - [ii] .

RSI is also divergent in this market. This bears watching.

The next decent potential cycle (KoolsTools) I see is a low set for Friday. This comes from the 8/3 and 8/25 highs.

The nearest intermediate degree target is (3) = (1) at 417.50.

Bottom line - I'm still bearish this market. It won't go down in a straight line, but I suspect we see price under 400 in the not to distant future.

There is a Supercycle degree triangle apex in the 320 area. I wouldn't rule that out either.

All prices basis continuous contract.

ES

ES had its 5th straight positive day. Range was 16.50 handles on light volume.

I am sticking with my specific count, although I'm pretty sure it's not what structure is forming.

I think something is going on that we wont know till later, which is not unusual. That something could be a lot of different scenarios.

One thing that we can certainly scratch off the list is that minor C completed at the 1038.75 H. Price traded through that level today. I'm not unhappy with that, as I did not like the fact that C was so small compared to A.

We really have to breach the 138.2% extension of [a], which is 1057, before we can scratch my expanded flat scenario off the list.

Regardless, near-term we should continue to stretch a little higher to finish iii. I'm a little unsure of where i should actually be.

There is an issue with 4 - 1 overlap by a smidgen. Cash does not have that problem. It really doesn't matter much though.

We do have nice RSI divergence, suggesting that we need a pit stop real soon.

Starting with tomorrow's update I will be using the December contract.

Crude

Crude closed higher on above average volume again today. Range was a smallish $1.58.

As expected we spent the day range bound tracing a iv wave. Even though range was on the small side, there were huge swings back and forth. Traders paradise.

It appears that we had a big flat followed by perhaps an [x] wave and are involved in a complex corrective.

It's unclear if iv has finished yet or not. My guess is it still has some work to do.

After completion, we should see a final v to finish minuette (a).

Bottom line - we should see higher near-term price before a meaningful correction.

Crude

Crude finished a little higher today on above average volume. Range was $1.86.

Per our discussion last night, crude looks to have finished its [5]th wave, thus completing iii. It appears that it took the form of an ending diagonal.

Notice the swift reversal off the 72.52 H, a signature of a ED.

If that assessment is correct, we should be tracing iv currently. ii was a zigzag, so based on alternation, we would expect something complex.

I have the retacement ratios on the chart. I would not expect to see a very deep retracement.

After v up completes, we should see a more meaningful retrace.

In all honesty, that [5]th leg counts much better as a 3 than a 5. I would not be surprised if we are still tracing some complex [4]th.

My guess is that tomorrow will be slow action (relatively speaking) for this market. Good thing about crude, on its slow days it is still very tradable - unlike that pos ES.

ES

The equity markets continued higher today on above average volume. Range was 17.50 handles.

As expected, we did finish off a higher leg today, though it may not have been the one I first assumed.

I'm showing two different scenario's tonight in separate charts. The first chart is one possibility of what structure may be forming.

This is based on minor A completing at the 1038.75 H. This means that a minute [a] leg finished at the 991 L. We are currently tracing [b], and when complete we will have [c] down to finish minor B. C up would follow.

If this interpretation is correct, then it appears that we have completed both minuette (a) and (b) and are in the process of working on (c).

It appears that sub-minuette i of v has finished. ii looks to be in process.

This second chart assumes that the 991 L completed minute [ii] of minor C.

If this view is correct, we will trace 5 minuette degree waves up to finish [iii]. There will be a retracement for [iv], at which point [v] up will complete minor C.

Looking at structure from this perspective, it appears that we have completed (i) of (v) at the 1036.25 H today. (ii) is in process.

Both cases should bring higher price. If we get a decent retrace here, I will have to assume that it is a (ii) wave and the first scenario is not in play (at least how I have it labeled).

There are other alternatives as well. If we can get price above the 1038.75 H, which I believe we will, this will eliminate the scenario that minor C has already completed. That will allow us to scratch that off the list, thus narrowing down the remaining possibilities.

If your one of the fortunate few who realize that equity prices have no business at these levels, understand how this great ponzi scheme will end up, and are beside yourself with angst and frustration over it all - just chill out for a bit.

Let the "greater fool" theory run its course. Stand aside and wait your turn because its coming. When it's here, we wont be scratching our heads trying to figure out if we have topped - you will damn well know it.

Crude

Monster day in the crude pit. Price finished 4.5% higher on heavy volume. Range was $4.25, or 85 handle ES equivalent.

As stated in the weekend update, price needed to "start higher right now." It certainly did. It also appears that we had a L-L-L cycle that played out, as mentioned this past weekend.

Price action broke the mid-line , took out the 68.38 H and the 69.40 H in impulsive fashion. Notice also that it broke free of the channel itself in a nice apparent iii wave.

If assessing structure correctly, we are tracing a micro degree [4]th of a sub-minuette iii wave. This suggests higher near-term price. We should have another micro leg higher that would complete iii of v.

Targets include: 72.40, where [5] = 2.618 of [1]; 73.64, where [5] = 61.8% of [1] - [3]; and 73.25 is where iii = 2.618 of i. Basis October contract.

Bottom line - [5] should finish fairly quickly, thus completing iii. I maintain my bullish bias near-term.

Price is just like your golf ball - sometimes you just have to talk to it :)

ES

The equity markets gapped up on the open and went nowhere. Range was 14.75 handles, which is misleading, as the pit session accounted for only 6.75 - yes, it really was that boring. Volume was well below average.

It appears the reason for the slow action today was price tracing a [4]th wave triangle. It can count complete, or (E) may have a little work left.

The triangle measures 8 handles. If (E), and thus [4] have finished, this would give a target of 1030.75. c = 1.618 of a at 1030.75, giving a nice confluence.

[5] = 61.8% of [1] - [3] at 1035, an additional level to watch.

Both the bigs and smalls finished about level. Practically all the work was done in the globex session on Monday and last night.

There was a big divergence after the pit closed. 100 lotters sold it, while the smalls bought/covered.

After the next little leg higher completes, we should see a retrace, or possibly impulsive action. This will give us additional clarity as to what structure is really up to.

I maintain my near-term bearish bias until structure says otherwise.

Weekend Update - ES

ES
I spent an inordinate amount of time this holiday weekend trying to get a handle on where the heck we are in the equity markets (in between a lot of football and beer of course :)

In my opinion, there are three different scenarios at play here:

1.) minor C has completed at the 1038.75 H. This finished intermediate (Y) of a double zigzag, which completes primary [2]. This would conclude the bear counter trend rally from the March lows. The "Great Bear" has returned.

2.) minor C has yet to complete.

a.) the 1038.75 H finished minute [i] of [v] of C.
b.) the 1038.75 H only finished minor A and we are tracing B currently.

The "Great Bear" has to wait a little longer before he returns.

You can make good arguments for each one of these scenarios. Each of the scenarios also have issues - some major.

My preferred at this point in time is that we finished minor A at the 1038.75 H. It is also likely the most bullish scenario.

This means that the 991 L completed minute [a] of B. We are currently tracing a double zigzag for [b], in what will either be a triangle or flat.

It is also possible that the 1038.75 H completed minute [i] and the 991 L finished [ii].

This means that we would be entering the meat of [iii] very soon, as it appears that we will finish minuette (i) in short order.

After a brief (ii) retrace, we hit (iii) of [iii]. This is the second most bullish scenario, though the least likely to be correct imo.

This is the bearish scenario. The 1038.75 H completed the bear rally.

The problem that I have with this view is that only Houdini and EWI can get a 5 down to the 991 L. Is it possible? Sure. It's very possible.

Structure, as many of you are aware, can be extremely difficult to discern at times. As mentioned in a post this past week, perhaps structure is trying to fool the masses.

I believe it counts best (actually very well) as a 3, therefore, this is my second alternate.

Here is my assessment of the intraday structure. Notice that we are very close to the upper boundary of the base channel.

This leg appears to be nearly complete, at which point, we should see downside pressure - regardless of the bigger count.

Bottom line - there is clearly uncertainty in the bigger picture with regard to structure and form. What is not uncertain is the deteriorating internals and technicals.

Two of the three above scenarios call for lower near-term price. That is my view as well. I'm anxious to see how price interacts at the March low channel line.

If we breach the 1038.75 H, then we will know that C is incomplete. If price takes the 975.50 L, scenario 2a is off the table.