US Markets: Steady as She Goes

Last week the financial markets reversed course again, amid global scenes of crisis and violence, to bid up a variety of risk assets. Our task is to consider the events in perspective, and try to draw out some direction for the week ahead

Read the full analysis here when it is published (Sunday in all probability).

For readers of this blog, a little something extra. I study charts of the major financial indexes on a continual basis. One can’t help but see patterns in the charts much of the time. Lately a pattern on the S&P 500 has been particularly intriguing.

I had mentioned before my curiosity about Elliott Wave analysis. While I remain unconvinced that there is a good level of predictive validity in this method, and wave counting seems too subjective to be of much use, I do notice these patterns when they appear. Consider the chart of the S&P 500 below. By my admittedly unprofessional count, it could be that the current corrective phase is the beginning of the A-B-C correction at the end of a 5 wave move. If that does turn out to be the case, then we are looking for a deeper correction at this point.

Any reader who is more familiar with the nuances of Elliott Waves is invited to critique or extend the analysis. I’m not sure it would change my market outlook, but I am curious.

(click on chart to enlarge)


4 thoughts on “US Markets: Steady as She Goes

  1. Harry,

    I had meant to reply earlier, but I became so busy. There has been too much on my plate for my slow mind.

    How I count Elliot Wave is this way. March 2009 to April 2010 as waves 1 through 5. April 2010 to July 2010 low as the second, bearish, set of waves 1 through 5.

    Now for July 2010 to November 2010, I count the waves 1 through 4. Then I RESET the count from December 2010 to March 2011 low as waves 1 through 2. Therefore I see this present upside as wave 3.

    I am expecting wave 3 to run a while, then another leg down before topping on wave 5, with the end of QE2.

    Sorry that I cannot include a chart on this format.

    I am basing my analysis on a Elliot Wave article that I read a few months ago. And I totally agree with you that the interpretation is highly subjective.



    • Aloha Shirley,

      Like you, I have far too much on my plate, and it’s getting to be more as time goes on (admittedly, there has been a good slice of having fun on that plate as well as work).

      I had initially made the same Mar-09 to Apr-10 wave count you have (it’s on this blog somewhere). The resetting is interesting; I don’t recall that technique from Prechter’s book, but it has been a very long time so my old memory may have failed. Is that an unorthodox Elliott Wave count?

      Anyhow, we may be heading toward the same destination by different roads. In this weekend’s article on SA, I continue to maintain the bullish outlook on equities, with the reservation that there is a small probability of a double top at the Feb. 18th high. If we clear that mark, which I do expect, then we are looking for another leg up.


  2. Harry,

    Let me see if I can copy the chart and also the link.

    The Basics of Elliott Wave Analysis – Cached

    The chart doesn’t post. And the link doesn’t highlight.

    That is where I got this reset theory.

    I just tested it. Do a cut and paste of the Title plus link, and the Internet will pull up the information as the first article. Hope it works.

    As I continue to learn how to analyze the market direction, now my latest read is a sideways market.

    I’ll go over to SA to read your latest article. Thanks for sharing on this blog.


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