Tracking the Elliott Wave count in the S&P 500: Objective Elliott Wave update by Tony Caldaro

Tracking the Elliott Wave count in equities is an increasingly high-stakes matter, since Prechter's Elliott Wave Int'l called a "wave 2" top a while ago, proven wrong by the markets' rise higher. Well, here's a little secret: measuring and counting the waves isn't really as easy as they always claim (when trying to sell their waves - er, wares) ... especially if you have a strong point of view, a/k/a bias. Fortunately, Tony Caldaro updates his Objective Elliott Wave counts on the S&P 500, along with his comments on and public charts link to his charts of other markets, at his Elliott Wave Lives On site (always in the sites list at right, with his daily updates feed below the list). A couple of days ago, he suggested that the long-anticipated "Primary B" wave may have topped. Let's see what he's saying in his weekend update:
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the ELLIOTT WAVE lives on
Market analysis using proprietary Objective Elliott Wave techniques
by Tony Caldaro

October 24
weekend update
REVIEW

After a good start to the notorious month of October markets worldwide stumbled a bit this week. The SPX/DOW were -0.45%, and the NDX/NAZ were mixed. Asian markets rose 1.0%, Europe finished mixed, as did the Commodity equity markets. Bonds lost 0.5%, Crude was +1.9%, Gold +0.2%, and the USD lost ground to the EUR but gained against the JPY. On the economic front the home builder index slipped to 18, jobless claims rose and the PPI went negative -0.6%. On the positive side, housing starts nudged higher, existing home sales rose, and leading indicators were +1.0%. The market was rising until wednesday, and the SPX hit 1101, when the Beige book was released, and then turned choppy and lower into friday's close.

LONG TERM: bear market rally
Historically, Supercycle/Cycle bear markets in the US display the following characteristics: 1. they are three wave structures, an ABC; 2. during the initial decline, wave A, the market loses about 50% of its value, or more; 3. the B wave rally is usually mistaken for a new bull market; 4. they last anywhere between 23 months and 60 months. The current bear market started in Oct 2007, 24 months ago. During the initial decline, wave A, the SPX lost 58% of its value (1576-667). The current B wave rally (667-1101) is being lauded as a new bull market. Wave C of the three wave ABC bear market has yet to unfold.
During Primary wave A the market took the form of a detailed zigzag (5-3-5): Major wave A was a five wave decline ending in Mar 08 at SPX 1256, Major B a three wave structure ending in May 08 at SPX 1440, and Major C another five wave structure ending in Mar 09 at SPX 667. Typically, a strong Primary wave B rally follows Primary A which often times retraces about 50% of the initial decline. From the Mar 09 SPX 667 low the market has rallied in three waves: Major A hit SPX 956 in Jun 09, Major B corrected to SPX 869 in July 09, and Major C just hit SPX 1101 in October. The Primary wave B bear market retracement from the low is currently 48%.
OEW turned long term bearish in early Jan 08. We tracked the waves down during Primary wave A until we identified a completed pattern in March 09 at SPX 667. At the low we projected the potential for a 50% bear market retracement rally to SPX 1122. During this rally we identifed three areas of caution: Jun 09 at SPX 956, Aug 09 at SPX 1039, and now Oct 09 at SPX 1101. Each of these areas coincide exactly with the three long term OEW pivots we have been tracking: SPX 961, SPX 1041 and SPX 1107. There is also a fourth pivot at SPX 1179. These last two pivots 1107 and 1179 defined the range we made for Primary wave B over a year ago. During this entire bear market every uptrend has ended at a long term pivot. Probabilities suggest that this pivot at SPX 1107 is providing significant resistance to this uptrend, and possibly Primary wave B as well.

MEDIUM TERM: uptrend hits SPX 1101
The Primary wave B rally is basically a three wave structure: Major A SPX 956, Major B SPX 869 and Major C SPX 1101 thus far. What initially started as an internal double zigzag structure (abc-x-abc) recently morphed into a more complex structure. Nevertheless, since this is an ABC rally the internal structure of Major waves A and C should be similar. In review of Major wave A we have labeled the internal structure as a double zigzag, with the second zigzag Intermediate C = 0.618 Intermediate A the first zigzag. During our current uptrend Major wave C, the second zigzag Int. C = 0.618 Int. A the first zigzag at SPX 1097. The market hit SPX 1101 this week, and that's very close to perfection. Also of note, the internal structure of this second zigzag Int. C displays Minor C = Minor A at SPX 1108. And lastly, the entire Primary wave B rally displays Major C = 0.786 Major A at SPX 1096. We therefore have a fibonacci cluster right around the recent high.
When we examine upside momentum we find negative divergences occurring on nearly all times: from 10 minute charts all the way up to the weekly charts. Negative divergences on the weekly charts have accompanied nearly every uptrend top during this entire bear market. One last observation. During Primary wave A the market experienced a crash that lasted over a two week period. This occurred during the last week of Sept 08 and the first week of Oct 08. The mid-point of that crash occurred on friday Oct 3rd at SPX 1099. This week the SPX rallied right into that acceleration point and ran into resistance. All this technical evidence suggests Primary wave B may have ended on Oct 21st at SPX 1101.

SHORT TERM. Support for the SPX is at 1061 and then 1041, with resistance at 1090 and then 1107. Short term momentum was slightly oversold at the close on friday. From the Minor wave B low at SPX 1020 in early October, we can count five waves up into the recent high at SPX 1101. This five wave rally is nearly equal in length to the previous five wave rally, Minor wave A from SPX 992 to 1080 in September. This entire zigzag is about 0.618 times the previous zigzag from SPX 869 to 1039. A break below the OEW 1061 pivot, along with a break below NDX 1720, would suggest that a downtrend is underway. Naturally, a rally above SPX 1101 would suggest that this uptrending is extending. Best to your trading!

FOREIGN MARKETS: The Asian markets gained about 1.0% on the week, India was -3.0%, and all but Japan remain in uptrends.
The European markets were mixed for a net gain of 0.3%, and all remain in uptrends.
The Commodity equity markets were also mixed with a net gain of 0.3%, and all remain in uptrends.

COMMODITIES: Bonds lost 0.5% on the week and are close to confirming a downtrend. The 1YR recently retested 0.34% and has started rising as well.
Crude gained 1.9% this week as its uptrend continues.
Gold gained 0.2% on the week as its consolidation continues. Both Silver and Gold remain in uptrends.
The USD lost 0.2% on the week to a new downtrend low at 74.94. The EUR (+0.7%) made a new uptrend high at 150.47, and the JPY (-1.2%) continues to weaken. It still appears the USD is close to reversing this six month downtrend.

NEXT WEEK: The economic week starts on tuesday with Case-Shiller home prices and Consumer confidence. On wednesday we have Durable goods orders and New home sales. Then thursday the weekly Jobless claims and Q3 GDP, estimated at +3.6%. On friday Personal income, Consumer spending, the Chicago PMI and Consumer sentiment. The FED has nothing scheduled for the week. The Q3 GDP number is probably the most important economic report this week. Followed by Case-Shiller and the two Consumer readings. Best to your week!

CHARTS: http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1606987