Sometimes the most useful information that can be gleaned from an Elliot analysis of the market has little to do with precise quantitative counts. I don't have really good counts on things right now, but I can see that:
1. Lots of selling was held off until post-Fed, just in case the Fed surprised with 0.5%. Why sell ahead of the Fed? He couldn't possibly disappoint, but might yield a positive surprise. Therefore, the held-back selling launched a rather impulsive selloff to slice through important support levels.
2. The breach of an important level invites a retest. If the breach created genuine buying interest, the move will develop impulsive character, and reverse the failure. This move did not invite any such interest, so it makes sense that it is struggling to make a resounding reversal of the failure. Hence, the up since yesterday PM looks corrective, not impulsive.
3. The first leg up yesterday was the early short-covering, and the second leg this morning was those that weren't around for the first leg - the guys who got caught with their pants down. This yields something like an "a" and a "c". Without genuine buying interest, however, there isn't the power to push the "c" to look like a "3", and not enough power to carry over to a "5" up.
4. There remains no fundamental buying pressure behind the market. Fund flows are negative. Insiders have no interest due to valuation and poor economic visibility. Dollar weakness has eliminated foreign interest, which is evident particularly in the giga-caps that foreigners tend to invest in. So, who is left to buy? Short-covering remains the only real upward driver here, which leaves most upward moves looking distinctly corrective in nature.
5. However, there is little selling pressure, largely because it is still summer. Hence, the downdrafts aren't coming together in nice, stretched-out impulsive patterns. Many of the downward patterns are overlapping, yielding lots of diagonals, largely because of the low summer volume.
6. The summer doldrums usually end at the beginning of September, the very first week. I suspect that the increased trading volumes will lead to clearer expressions of trend, ie more impulsive moves. But without a fresh source of Clownbux to burn from somewhere, it's unlikely that any extended impulsive up can be formed.
So, several useful pieces of info can be gleaned from an Elliot perspective without so much as a single quantitative count.
That said, lots more shorts are sitting on fat profits, which makes the market like a coiled spring. If there were a catalyst to cause a larger squeeze, it could produce a larger scale impulsive upleg. But squeezes require liquidity from somewhere, and it's in short supply around most of the usual parties that orchestrate short squeezes.
BC |
