Blog Posts on Elliott Wave Lives On: Oct 28-Oct. 31, 2014

George Schaeffer says:
October 28, 2014 at 6:47 pm:

The R2K ($RUT) was up 2.86% today compared to a rise of 1.19% in the $SPX. $RUT:$SPX (relative Strength of $RUT vs. $SPX) is showing signs of a nascent uptrend:

http://stockcharts.com/freecharts/gallery.html?s=%24RUT%3A%24SPX

The A-D line recorded a plurality of +2098 with the DJIA up 188 and the SPX up 23 1/2. The McClellan Oscillator rose to +80 and it’s derivative, the Summation Index, has climbed from a low of -635 to today’s -220. Today’s breadth performance was strong enough in relation to the rise in the large-cap price indexes to be considered part of what PN Haurlan and Dave Holt of the former Trade Levels service called a “kickoff impulse”. And I think “impulse” (as in “impulsive”), rather than corrective is the right way to describe the market action since the 1821 SPX low.

IAWT says:
October 30, 2014 at 4:05 pm:

"This not acting like a corrective wave at all in my opinion. It hasn’t from the start. It looks like a sub dividing kick off rally wave. Once again….oct 2011 deja vu. Down into Turkey day then rockets back on into February."

George Schaeffer says:
October 30, 2014 at 6:05 pm:

I agree with IWAT and have posted that the rally since Oct. 15 has looked like a motive wave more than a corrective wave because of the strong "kickoff impulse" characteristics it has displayed. This description is founded on the broad and deep market participation that has characterized it. With the McClellan Summation Index having risen to -90 from -635, we see objective evidence of a persistently strong A-D line. The chart pattern of the relative strength of  R2K vs. SPX still looks like the early stages of an uptrend. It needs to surpass it's preceding high of .5858 to confirm that it's recent rally is more than just a corrective uptick.Again here is the chart of $RUT:$SPX:

http://stockcharts.com/freecharts/gallery.html?%24RUT%3A%24SPX

The evidence in support of this rally being a corrective wave is Tony's OEW work and the V-shaped pattern the rally has traced out. Impulse upwaves tend to have a broader bottoming pattern and corrective upwaves are more likely to be V-shaped. The market was strong but somewhat mixed today with the DJ Transports down 84 while the DJ Industrials were up 221.
If the rally were to continue showing this kind of incomplete participation by market segments, I would consider that to be support for the corrective B wave thesis.
However the DJTA had posted a new high on Tuesday while the DJIA had lagged considerably. The strength of the Industrials this week, and especially today, combined with the weakness of the Transports over the last 2 days will create a better opportunity for a joint closing by both the DJIA and DJTA at new highs. This would represent a Dow Theory bull market confirmation and would also be bullish for the intermediate term trend, coming as it might only 2 -3  weeks after the low point of a sharp correction.

I should add that my agreement with IWAT does not include this part of his post:

"Once again….oct 2011 deja vu. Down into Turkey day then rockets back on into February."

I don't expect a decline into Thanksgiving from today's close. After making new highs, we might expect a kind of consolidation before the rally resumes. The day before Turkey Day is often a good up-day.

George Schaeffer says:
October 31, 2014 at 3:14 am

The correction down to the 1821 low did not look nearly deep or long enough to me to be a P4, but it did look to be about the right magnitude for an M4. I believe that the surpassing of the SPX 2019 high will occur by Fri., Nov 7.  If that occurs with good A-D line strength and wide price index participation, that will be strong enough proof for me that we have completed M4 of P3 and are now in M5 of P3. Tony's OEW group will probably figure out a wave pattern that describes recent price action in those terms.

Technical Points for the $SPX on Oct. 20, 2014

The $SPX is coming up from below against 2 vital resistance points: it's 200-day SMA and the 1905 low of Aug 7. For those few on this site who may not know this:  Once a low point which has been downside support is broken, it becomes resistance when the price of the item moves back up towards it from below. So if the $SPX can rise above these former low points, it will have made an excellent technical accomplishment. The 200 day SMA was not a previous low point per se, but it did provide technical support for the $SPX for a long time period. So the principle described above works the same way for it as for the 1905 former low.
Additionally,  Richard Russell's PTI stopped going down right at it's 89 day MA on the day when Major Wave A  of Primary Wave 4 probably made it's low. Russell's Dow Theory Letters has used the 89 day MA as the dividing line between bull and bear markets for decades, and it seldom if ever has given a wrong signal. It seems to be an exception to the principle of indicators losing their validity after too much exposure.

Link to $SPX chart on Stockcharts.com:  http://stockcharts.com/freecharts/gallery.html?s=%24SPX

                                                                                                   

Mystery Indicator & Monday Oct 13 2014 A-D Action

The Mystery indicator is starting to move down for all the Price Indexes, but not yet in proportion to the degree of the price declines. I am at the point of concluding that it is of no use in predicting intermediate-term corrections (do not mean intermediate Elliott waves). Maybe it is accurate in predicting or tracking the primary (long term) direction of the various price indexes, or maybe it's numerous detractors are correct in believing it is a just plain useless indicator. I am therefore discontinuing my commentary on it until the bull market is over; then I will try to see how well it matched market price action over the course of the entire bull market.
The small-cap R2K was down only .38% today and the A-D line posted a -1116 on a day when the $SPX recorded a -31.39 and the DJIA a -223.  On a day like today, the R2K could easily have put in a  -2.5%  day and the A-D line could easily have displayed -2000+ declines over advances. Inasmuch as the latter two indexes had previously been the market leaders, maybe this is a sign of Major Wave A decelerating, and hopefully  approaching conclusion.
The RS of the R2K vs SPX made another potential bottom and incipient turnaround today, but we shall have to see if it becomes an uptrend. Here is the link to the chart:

http://stockcharts.com/freecharts/gallery.html?%24RUT%3A%24SPX

Dow 167 Point Rally Sept. 26, 2014

On Thurs. Sept 25 the DJIA was down 264 points and the $SPX 32 points. On a Big Down day like that, one might have expected the NYSE A-D line ($NYAD) to show a reading of -2500 or lower. But it only posted a plurality of -2034. On Friday, when the Dow rallied 167 points, the $NYAD line plurality was +1416, much better than the +550 that it recorded on Wednesday Sept 24, when the DJIA rose 154 points. The $NYAD's derivative indicator, the McClellan Oscillator (filter of the  $NYAD) moved up from -79 to -43.
Just as a weakening A-D line portended a sharp market sell-off, a strengthening A-D line will confirm a resumption of the uptrend. Such a relationship is usually the case, but toward the end of bull markets the large cap stocks can continue up strongly without support from the A-D line. The Jan. 1999 - Mar.2000 period was a classic example of this. So far in this bull market, the A-D has led the market up, and the $SPX has not been able to mount a sustained rally without accompanying strength in the $NYAD. That pattern shows no evidence of changing now. For the $SPX uptrend to strengthen,challenge and surpass the $SPX 2019 high, Friday's improving A-D action must continue, and preferably accelerate.   The fact the the A-D line became resurgent right at the bottom of the 1973 Objective Elliott Wave pivot range (at 1966) seems like significant support for the idea that 1966 was a Minor 2 bottom and that a Minor 3 rally is now commencing in earnest.
While there is a correlation between the A-D line and the $RUT, it seems to exist mainly in one direction. Which is to say that for the $RUT to make new highs, it is necessary for the A-D line to do likewise; however the A-D line can ascend to new heights without the $RUT following suit. Tony Caldero and various Objective Elliott Wave posters have commented that the $RUT seems technically broken. For the rest of Primary III I expect that the R2K will at best prove to be only a short-term trading vehicle, and a stressful  one at that. Links to Stockcharts given below:

$NYAD:   http://stockcharts.com/freecharts/gallery.html?$NYAD
McClellan Oscillator:   http://stockcharts.com/h-sc/ui?s=$NYA&p=D&yr=3&mn=0&dy=0&id=p83733137120
Russell 2000 Index ($RUT):   http://stockcharts.com/freecharts/gallery.html?$RUT
RS of $RUT to $SPX:    http://stockcharts.com/freecharts/gallery.html?%24RUT%3A%24SPX
 

$NYAD, NYMO, NYSI & $RUT Sept 22, 2014

Obviously the $NYAD is really doing poorly and the relative strength of the $RUT vs $SPX is falling below its support,  nullifying what had been a potential base building process:

http://stockcharts.com/freecharts/gallery.html?%24RUT%3A%24SPX

The $NYAD seems to be heading down for support at 101,400. If that is the case, it implies some extended down side action for the R2K and to a lesser extent, the market as a whole (and the $SPX):

http://stockcharts.com/freecharts/gallery.html?%24NYAD

The NY McClellan Oscillator could be trying to make a short-term double bottom around -60; if it does so that point would connect with the Aug 1 low of -90 to create a rising trendline. If the NYMO stays above that potential uptrend line, it would pull up the Summation Index as well. If the A-D line continues to decline sharply, the NYMO will fall below the -60 level and pull down the Summation Index below the 0 line. The Summation Index measures the persistence of the A-D line in a particular direction. A rising SI almost always means the market is rising and is an especially good omen for the R2K.

Will Rally Extend Before Larger Correction?

The McClellan Oscillator has remained positive during this pullback and thus the Summation Index has continued to post positive gaps. If the McOs does not decline further and then the A-D line posts some +1000 to +1500 days, there would be support in the SI for a 9 wave minute 3 of minor 3 of intermediate 3 of major 5 (Elliot waves). Any further weakness from here would nullify that possibility and confirm Tony Caldero's preferred scenario of an $SPX decline to the 1929  pivot, with my $RUT projection being 1143 (based upon my Mon, June 9 post).

 http://stockcharts.com/h-sc/ui?s=$NYA&p=D&yr=3&mn=0&dy=0&id=p83733137120

A-D Line, McClellan Oscillator, & Summation Index June 6, 2014

    The A-D line posted two consecutive very strong days: +1731 on June 5 and +1473 on June 6. This resulted in the McClellan Oscillator rising to 35.72  with the Summation Index breaking above it’s high-level base when it cleared 850 and with it now moving up towards it’s early March high of 1050. The SI has moved up in a series of fits and starts but has created a definite uptrend. We'll see if it has enough power in it to reach the March high without making a short term correction first.         
    In the meantime we can look at the relative strength chart of the $RUT vs. $SPX.  Here is a link to the chart of $RUT : $SPX for June 9: 

http://stockcharts.com/freecharts/gallery.html?%24RUT%3A%24SPX

   It has broken above it’s downtrend line and might come down to back test it on any correction. I am thinking the RS ratio would have to move higher before it did fall back to the downtrend line, however. I am not a paying member of Stockcharts so I cannot draw in a trendline. You’ll have to use a soft straight edge on your monitor screen. That means the $RUT price would be about .5950 to .5930 x whatever the $SPX is at the time it touched it’s downtrend line from above.

   To have forecasting value, you would have to estimate what the $SPX might be when the RS ratio hit the .5950 – .5930 range (I am talking about a short-term correction here). But that would be an easier task than estimating the more volatile $RUT price. The $SPX closed at 1928 on the day it broke above the down trend line. By watching the $SPX as the RS retraces to the downtrendline (say at .5940), we might estimate to within a couple of points where the $SPX would touch it, and using the RS ratio value, calculate where that would be for the $RUT.

Using the above method and guessing that the $SPX would be around 1924 when the RS approached it's previous down trend line from above, the $RUT value would be about .5940 * 1924 = 1142.86.