Weekend Update - #2

30 YR BONDS
The 30 Yr failed its retest of the 50 sma, which resulted in nice downside price action for the week.

The 50% retracement level of the move off the 111-23 L, which I have labeled (X)?, supported price again. I believe this level gives way rather soon.

Equality comes in at 114-16. The minimum downside objective is 116-26.

My guess is that price wants to test the 114-26 pivot. The 78.6% retracement level is in the same area.

The bigger picture still remains unclear to me. If the 30 YR did put in an intermediate (X) wave at the 123-25 H, this would mean there is another (A)(B)(C) that should play out to the downside.

Bottom line - I still expect to see another 5 waves down of minor degree, at minimum. We will reassess at that point.

CRUDE OIL
The crude market continues with its corrective off the October 21 H. We have spent 12 trading days in this choppy sideways pattern.

Until structure suggests otherwise, I will continue to assume that we finished a minute degree wave [i] at the 81.99 H.

Friday's price action gave us a decisive close under the 20 sma. If we go back and retest the 20 sma with a failure, look for price to try and find its way back to the 50 sma, which is currently at 73.78 and rising.

I will reiterate from last weekend's update, this move off the 81.99 H in no way appears impulsive. This is suggestive of higher price.

The retracement levels of minute [i] (or whatever it turns out to be) are on the chart.

We are due a minor KoolsTools cycle low Wednesday.

Prices basis continuous contract.

DOLLAR INDEX
The greenback had a huge spike higher Tuesday, before spending the rest of the week retracing the move off the 75.085 L.

It appears that early morning spike was a "thrust" out of a (iv)th wave triangle. If correct, the 77.50 H completed a 5 wave structure that would be labeled minute [i].

The ensuing retracement would be the wave [ii] retracement. It is unclear if [ii] has finished or not. It has retraced 78.6% thus far, a perfect wave retracement in my opinion.

Notice that RSI has failed to breakout of the 50% level once again. This has become the rock of Gibraltar.

Also notice that price could not successfully close the 50 sma.

Both of these appear to be setup to give way when we get our next 5 waves up.

The 75.085 L is a critical level for this assessment. Should we trade through that price, we obviously have something wrong.

Prices basis combined contract.

GOLD
The gold market had hard upside price action this past week.

I stated last week that I was suspicious that minute [v] had in fact completed at the 1072 H. Those suspicions were confirmed with price action.

My best guess is that minute [iii] actually finished at the 1072 H, though I have it labeled as a minuette degree on the chart. It really doesn't matter, as this leg should finish off structure out of the triangle.

It appears that we should have one more small subdivision higher, though it certainly may be complete.

Once we can count a 5 wave move down, that will be our confirming evidence that intermediate (B) is finished.

Bottom line - it appears we are very near an intermediate degree top. Once in place, structure suggests that we should see price trace out an intermediate degree (C) leg down.

This should take price down to the price extreme of (A) around 700, assuming my interpretation is correct.

Price basis December contract.

Weekend Update - Grains

CORN
The corn market continued retracing its leg off the 302 L this past week.

My interpretation remains that this market is tracing an intermediate degree (4) wave of primary [A].

I still have concerns about this (4) wave. As discussed last week, it appears to be tracing a zigzag. After such a deep A leg, we are left with little room for C. We did have a nice B leg up that helps.

The price extreme of (1) is 347.60. Should price trade through that level, I would have to re-think my assessment of the structure.

The 50 sma has turned up, and is now above the 347.60 level. This may possibly help support price when they meet.

Notice that RSI has reached the upward sloping trend line, which dates back to early June. This may provide support as well.

Don't forget about the "point of recognition" at the 353 level, an additional possible level of support.

C = 61.8% of A at 365.25. The 78.6% projection of A sits at 356. The 61.8% retracement of (3) comes in at 349.50.

Bottom line - Until 347.60 is traded through, I maintain my bullish stance.

Prices basis December contract.

SOYBEANS
The bean market continued with its wave (2) retracement this past week.

Interpretation remains intermediate wave (2) of primary [C] of a double zigzag cycle b wave. The primary [B] wave triangle is still my alternate view.

Drilling down intraday shows a very nice ABC corrective so far for wave (2). Price had a nice deep 88.6% retrace.

Perhaps it will want the reciprocal, 112.8% of A, for this C leg. This comes in at 944.

Other targets are where C = A at 953.75, and the 161.8% projection of A at 911.25.

The retracement levels of (1) are on the chart.

As stated last week, I am still hopeful that the channel can maintain its integrity during this retracement process. It has supported twice thus far, making it vulnerable for a break, should price reach it.

The key levels for this upcoming week include the 880.25 L, as well as the 1029.50 H. Any trade through that high will likely signal that wave (3) has begun, assuming our assessment is correct.

I maintain a keen watch of the continued RSI divergence.

Bottom line - I expect wave (2) to come to a close shortly. We should witness nice upside price action with the onset of (3).

Prices basis continuous contract.

WHEAT
Like the other grain markets, wheat continued its corrective process this past week.

I interpret structure to be in minor C of intermediate (2) of primary [A].

The nice B wave bounce that I was hoping for came to fruition this past week. Notice the unmistakable zigzag look of (2).

I have the retracement levels of (1) on the chart. The 78.6% level sits at 468.50.

The minimum downside objective for this C leg is the 61.8% projection of A at 475. Equality is down at 441.75.

Notice that RSI has broken its uptrend line. This is normal and allows RSI to reset for a big (3) wave push higher.

Naturally, any trade through the 302 L invalidates this interpretation.

Bottom line - Expecting price to continue working on the (2) wave. When complete, we should witness hard upside price action, that should leave the channel in the dust.

All prices basis December contract.

Crude

I just don't have a whole lot to say about the crude market, except that it continues its corrective from the past couple of days.

Off the 81.06 H, it appears to me to be a zigzag-x-flat combination.

You could make a good argument for a [B] wave triangle, with the 80.48 H completing an (E) leg. The leg off that high does look "thrusty." Those of you with a good eye should easily be able to spot the triangle form.

The bigger daily picture is still unclear as well. Has the corrective finished? Don't have enough information at this point to make that determination.

The move off the 79.34 L does not appear impulsive - go figure.

I do believe that all this mess does eventually get resolved to the upside.

Not much help here tonight folks.

ES

As expected, structure played out exactly as was suggested last night.

Wave (b) was indeed complete at the 1041.50 L, right at the 50% retracement level.

Wave (c) appears to be tracing a diagonal triangle here. This suggests that (c) has finished its first 4 waves, with this being v of (c).

If this is correct, then (c) will never make it to equality. The 78.6% projection of (a) is at 1066.25. The minimum objective of 61.8% of (a) was met at 1061.

We have retraced a satisfactory amount of minute [i], as the 50% level was met at 1062.25.

I'm not real thrilled about this potential triangle development. I would much prefer a retracement process that took us to at least the 70.7% level.

There are alternatives. Perhaps this is a double zigzag combination and this is a b wave, with a nice c to follow.

There is also the possibility that if price and/or time has not been sufficient, then we would trace an (x) wave after completion of (c).

Just take it one wave at a time.

EWI FreeWeek

For those of you that are interested, Elliott Wave International has a free week of their Elliott Wave Theorist, Financial Forecast, and Short-Term Update. This started yesterday at noon and runs until next Wednesday.

On the very top left-hand side of the blog, there is a box that you can click that will take you to the promotional page on their website.

It also allows you access to tutorials, both print and video, as well as a few other subscriber based features.

I would suggest downloading as much of the resources they allow you access to.

ES

Quick take on my view of ES.

My guess is that minute [ii] has not completed as of yet.

I show the 1057.50 H as finishing minuette (a). Wave (b) looks to have traced an expanding flat. If this is correct, (c) up should follow.

If (b) has completed, which is not clear, upside targets are the blue fib set. Equality comes in at 1073.

The retracement levels of [i] are on the chart.

I was anxious to see how price would react to the meeting of the channels. Not surprisingly, they decided to gap it over, instead of the hand to hand combat alternative.

It should be noted that [ii] may very well have finished at the 1058.50 H, where I have b. The minimum requirements are met at that level. This is not my view, but it is certainly possible.

Bottom line - I am expecting (b) to finish up in short order, if not already. From there, we should see 5 sub-minuette degree waves up to complete (c), and thus [ii].

Scalpers like me, should find this leg up very tradable.

Crude

An up and down day in the crude pits with price finishing higher. Range was $1.94 on slightly better than average volume.

I'm sticking with the 10 range chart again tonight, as it really shows the subdivisions of structure well.

We clearly had a 5 wave impulse off the 81.06 H, shown as sub-micro degree waves on the chart. The larger degree that it completed is unclear currently. I show a micro degree [1] or [A].

You can also see what appears to be a nice double zigzag that retraced back to the 80.03 H. This is labeled as [2] or [B].

So, we had 5 down from the 81.06 H, followed by a 3 up to the 80.03 H. At minimum, we should have another 5 down for either a [3] or [C] wave.

You can see structure subdividing off the 80.03 H in impulsive fashion as expected.

The pink fib set relates to the micro degree structure. Equality comes in at 79.24. [3] or [C] = 161.8% of [1] or [A] at 78.27.

Interesting enough, the 127.2% sits on top of the 50% retracement level at 78.80, while the 161.8% sits on the 61.8% retracement level.

I hope this leg really extends. I'm short with a text book entry :)

Crude

After early morning weakness, crude got busy subdividing higher. Range was a healthy $3.22 on above average volume.

I show this 10 range chart because it shows the wave structure nicely. This is one way of interpreting it.

It is unclear to me if we ended the structure at the 79.77 H. If not, it may be tracing the wave [4] currently. I show the possibility for a running triangle.

The (C) leg (not shown on chart) looks to have been a double zigzag, and would have finished at the 79.13 L. If a triangle, (D) would be in process, with (E) down to follow.

Any trade through 79 would invalidate this view, as this is the price extreme of (A).

I remain sceptical that this corrective has run its course in the bigger picture.

Did you notice the explosion in gold and silver today? Impressive indeed.

Crude

A little bounce back day in the crude pits. Range was $2.10 on above average volume.

Price found support on the breakout level, which is not unusual. This support was helped by the 20 sma, which was held on a close basis.

We have retraced a 38.2% so far. As mentioned in prior posts, I would really like to see a deeper retracement if this is indeed a minute [ii] wave.

In all honesty folks, I'm not exactly sure what the hell this corrective is tracing currently. I spent about an hour and a half coming up with some different ways of viewing this corrective structure.

My conclusion - I wasted good time.

I am convinced that this is corrective and not impulsive. I could throw a bunch of wxy's and abc labels on a chart, but it would just be speculative.

Best to just let this thing play out. It will let us know when it's done.

I can say that I think (guess) that the move off the 80.46 H is an a wave. It looks like today was the tracing of the b wave, with c down to follow.

I'm not sure if this was an expanding triangle or just some combination. It does appear as though we finished a little [B] wave (or [4] wave) triangle late in the day. This suggests higher price overnight.

Just count your 5's and 3's intraday and continue to take their money. The bigger picture will clear up soon enough.

Weekend Update - ES

ES
Not a good week for the equity markets is a understatement. The ES declined 44 handles on the heaviest volume since March.

It appears that we will have an impulse down from the 1099 H. We have also broken the uptrend channel's from both the July and March lows. More importantly, we have a weekly close solidly underneath them.

This is confirming evidence that, at minimum, we have an intermediate degree top in place. It is too early to determine if the bear rally has run its course. It is entirely possible that is the case.

This is my view of structure off the 1098.50 H (pit session) with a 15 minute chart. This is a beautiful wave structure so far.

I have moved wave (ii) over, which gives nice alternation with (iv). This was discussed in Thursday's update. It also gives us a perfect channel.

Drilling down further, shows that wave iv of (v) appears to have taken the form of a barrier triangle (p. 50, figure 1-42 Elloitt Wave Principle).

As the good book tell us, barrier triangles horizontal line "always occurs on the side the next wave will exceed" (p. 49 Elloitt Wave Principle). This means the break will be to the downside.

If a triangle, it measures 11 handles. This would be measured from the price extreme of where [E] completes. If we assume a 61.8% retrace, this gets us to the 1024 area.

Conveniently, the 3 bar daily projection is 1023.75. Funny how things always seem to work out like that :)

The 4 hour chart gives us a look at where the retracement levels of minute [i] are.

If your bearish, you actually want a deeper retracement process. As I have noted many times in previous posts, the deeper the wave 2 retrace, the more powerful the ensuing wave 3 - generally speaking.

Notice also, we have positive RSI divergence. This should come as no surprise.

I show a double zigzag (ABC-X-ABC) for this entire structure off the July lows. EWI has this labeled as an ABC with an expanding ending diagonal for C. Ummm, if you say so.

It really makes no difference folks. The important thing is recognizing that something of intermediate degree, and possibly primary, importance has occurred.

The monthly view shows how the channel has been left intact.

Secondly, Notice how price eventually held the 20 moving averages on a close basis.

Also, notice the monthly projection has been fulfilled at 1097. Koolio's work told us this would happen 7 months ago! Did you believe it?

Bottom line - I do believe the evidence overwhelmingly supports the case for an intermediate top being in place.

Near-term, I'm expecting the ES to complete the [E] leg of the triangle, then to finish off wave (v) of [i]. We should see a meaningful retrace at that point, that should be very tradable.

If I'm correct in my assessment, wave [ii] will be a "suckers rally." Wave [ii] completion should provide a very nice shorting opportunity, and a place to get rid of your longs.

As always, please do your own due diligence.

Prices basis December contract unless noted.

How's that Margie :)