DOW, DAX, SPX, NYA , STOX600, TSX, DJT

February 10, 2012February 10, 2012 Hamilton

The DOW has clearly exceeded its May 2 high of 12876 by about 50+ points. This would normally negate the count, that is the one where this was wave 1 down followed by an a-b-c correction/rebound. I simple do not know what to do with this! The structure is just fine, only it should not have gone this high. EW is supposed to work when markets work, that is when there are a multitude of participants who freely make up their minds to buy or sell. Perhaps this precondition is no longer met now that CB’s have thrown in 15 trillion into the punch-bowl (1/3 of the value of world equities!), never mind all the other “stimulating” factors. I just do not understand but at the same time will not get religious or dogmatic about it. Other than the Nasdaq, which is in a completely different phase, just about every other major index has NOT negated this count, so for the time being we will stick with it. Below are some examples;

You can click on them to enlarge. Un till such time that a few more of these “negate” the count I will take the catholic approach and simple nullify this one single incident.

DAX (Frankfurt) and NYA (New York), why counting is so difficult.

October 5, 2011October 5, 2011 Hamilton

EW has some aspects that make people wonder in bewilderment how anybody could possible attach any predictive value to it at all. There are tops and “orthodox” tops and failed tops. There are extensions that out of seemingly nowhere add 4 waves to a sequence. There are “irregular” patterns where lower lows or higher highs do not count and the list goes on. For those interested here is an example;

On the left the DAX and on the right the NYSE index. Both have 3 tops at slightly different levels and the middle one is the highest but not necessarily THE top. Getting there certainly does not look like 5 waves and the first wave down on both is anything but a clear 5 waves. The Aug 9 action of 4 days of 400 points up and down obscures the picture, There is no clear wave 4 on DAX whereas there is a pretty clear one on the NYA. Wave 5 on both charts has the clear earmarks of a contracting diagonal, or in English, a wedge. However the position is different. On the DAX the wedge hugs the lower trend line, whereas on the NYA the wedge is further to the right so one could be wave 5 of 3 and the other wave 5 of the entire wave one, different degrees! The DAX made its low almost a month ago and the NYA just a few days ago, yet we are supposed to believe that the world problems are now coming from Europe.

Looking superficially at both charts one might be inclined to say that they are essentially the same, and they are but the implications are quite different for the next move!

NYA , New York SE Index.

August 26, 2011August 26, 2011 Hamilton

We have used the NY stock exchange from time to time as it seems to provide a better “picture” than either the Dow or the S&P. Back in April we got real vocal about the market as this is what it looked like at the time;

We marked the ideal target with a little green circle and “green spot”. The reason, obviously, is that the NYA appeared to be tracing out an absolutely perfect B-wave A-B-C where the A and C were going to be vector equal and the B a text-book example of an expanding triangle. Today it looks like this;

and in more detail;

This would be essentially the same for the DOW, S&P, Russell 2000 and many others, not however for the Nasdaq that made its top in July and not April. But regardless of the detailed count it is absolutely normal for the price to retrace to the level of the B-wave on the way up, in this case 6400.

For comparison purposes I have added the TSX and the DAX below. You can click on the charts to enlarge them and move them around. Notice that there is no point in diversification, if there ever was. All three, the NYA, TSX and DAX (and many others) have all done the same thing. They more or less doubled in a nice B-wave and now they will all drop back to the level of the B in that A-B-C. (The Dax has a contracting triangle instead of an expanding one, just take the lowest point).

Just as the Dax was a little ahead on the way up, it is now ahead on the way down. Remember that B-waves are corrective, that is to say they are counter-trend therefore it follows that in the not too distant future we should be trading below the March 2009 lows. The drop down shown, once complete, is just wave 1 !

Error ; in the chart r=A=B should read r=A=C

NYA , NYSE index

April 4, 2011April 4, 2011 Hamilton

Both these charts are of the NYSE index, NYA. The one on the left is a few months old and the one on the right is up to date. There does not seem to be that much difference, unless of course you are waiting for something to stop this best 9 quarter advance since W2. We did get a little dip but are right back at it but with each passing day the picture gets clearer and clearer. A little further and we will have a very clear A-B-C counter-trend rally from the lows of March 2009. This implies that , at the very least, we should go down for a while in a measurable way, perhaps even to new lows.

Reading the latest forecast from the Prechter fellows in Gainsville , I was reminded of the existence of the Dow Jones Utility Average index. There is nothing very special about this index except that, so far at least, it has followed the EW prescribed path much better than most others. It has retraced 50%, right into the 50/62% range that one would expect when working with a clean board. This is actually quite amazing as the utilities are normally viewed as a defensive segment of the market so, with the financial world collapsing one would expect the DJUA to outperform, not underperform. Here is the chart;

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