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MortiES' Weekend Update 24July2010 ~ The Big Picture

This is the analysis that my premium subscribers received this evening. I post at the Value of Perfect Infomation. Join my newsletter as well!

Friday made a new high that ruined a Bearish count for some Bears. Don't feel too sorry for them, because they can still devise another Bear count. This Weekend I want to look at the Big Picture again, and because there is some ambiguity in the Weekly chart of ES I have compared the Weekly charts of other indices. It was an informative exercise.

First, we will look at the Weekly chart of ES that has been guiding my analysis by providing an overarching view of the market. Back on May 6th when we had the big one-day crash, I presented an overview of the market and said that I thought it was very possible that we were seeing a W4 of the rally from 6 March developing. I gave two W4 targets with the 61.8% retracement of W3 being the most extreme target that had to hold. Well, as you can see on the chart below, ES did get down to the extreme level and reverse. Now it stands as a line-in-the-sand for the Bulls. This count on this chart is made by AdvancedGET, but this software is not the Holy Grail. It merely gives one way to count this market. Because not all the indicators confirm ES making a new high, I look at the other indices in the charts following. To confirm that this is most likely a W4, ES needs to get above 1029.50 (Wave B of W4).

ES Weekly

Next I look at the Dow Transport Weekly chart. The Dow Transportation average has traditionally been a leading index. The analysis of this chart shows that all the indicators and other factors I look at are favorable to a successful W5 developing. Specifically, where the PTI (profit taking index) fell below 35 on the ES chart (not good for a successful W5), it is >35 on this chart.

Dow Transports

The Nasdaq has been a strong segment of the market throughout the rally from 6Mar2009. As with the Transports, the Nasdaq Weekly chart also supports a successful W5 taking out the W3 high. Also, like the Transports, W3 ended at the 78.6% retracement of the former market high (not the bubble in the early 2000's). Getting above this level will be very Bullish.

NASDAQ

Then we look at the mighty DOW. It too supports the development of a successful W5 with a reversal at the most typical W4 target level (50% retracement of W3).

Dow Industrials

The overview of the Weekly charts of the indices seem to support the count that I have on the charts. Until ES says otherwise, I will go with this Bullish view of the market. I am sure EWI won't approve of this count, but I never was a joiner. I want to live up to my motto, "Always original, Sometimes right!" For those who believe that W3 was the end of an impulsive move and not W3, I say that that is entirely possible. That count is not far behind this count. I can make GET give me that count by using a Daily chart. I must admit that one consideration that makes me favor the more Bullish view of the market is the "summer rally" phenomenon. No matter which view is correct, it doesn't make a difference in my day trading tomorrow.

So what about the next trading session? That is really what my analysis is all about. Actually, we are at a somewhat tricky spot. I can make a case for either strength or weakness. Just because I believe we are in a W5, doesn't mean I think that every day will be up. The chart below explains what I am seeing in the market. Bottom line, the most Bullish thing I can see happening is a gap through the 78.6% resistance level I have on the chart and a strong rally. The next most likely scenario is consolidation under the resistance before heading higher. And then there is a Bearish scenario where ES corrects back to the former W4 before heading higher. I can't predict which will happen, but I will give updates as ES yields more data.

ES 90-Minute

We don't provide a day trading system. I am a probability trader that has modified a system that gives you an opportunity to learn to fish. The value we provide is in understanding setups and managing risks. However, there are times when I will give you a fish and other traders here will do the same. Also, please remember that this is about probabilities, not certainties.

My goal would be an "Elliott Wave for Dummies" curriculum. I love all the "for Dummies" books because they strive to simplify and clarify. They are profoundly simple. The mark of a good teacher IMO is someone who can get the hay down from the loft so the horses can eat it. Many teachers like to complicate their subject matter so they can appear "smart". I have no use for insecurity in teachers. The old saying that "it's better to teach someone to fish than give them a fish" is never more true than in teaching.

To that end, the best way to see what we do on a daily basis and on an intraday basis is to try our Premium Content. If this site doesn't add back more than the price of admission, then you have no obligation to subscribe after one month, and you will have still learned some Elliott.

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