Elliott Wave Stock Market Update - August 12

The market made a lower low and changed the count I was following. Now that the trend is solidifying to the downside, I have to see what is the best count for the overall structure. Overall, the waves don't have an "impulsive" look to them due to all the zig zags/abc counts, including the wave today which staged a major reversal. But this is an inherent predictive flaw in wave theory (assuming 5 counts are always impulsive and zig zags are not), so I have to see what is the most likely overall count now considering there is a good chance of more downside ahead. The SP500 looks like it will have a death cross in the next week or two as well and we can start speculating for bottom targets once these waves are deciphered. Below is the chart I posted couple of weeks ago on the longer term count and tomorrow I will change the labels to reflect the likely LT W3 top the Fib targets.

Lastly, the recent change in sentiment is tied to the Chinese remimbi (or yuan). Which I think puts the Fed in a difficult spot. Up until Monday, the yuan was essentially pegged to the US dollar and had shared the burden of the appreciating dollar with the expectation of rising interest rates in the US. But now that they have decided to essentially go with the market and let the dollar do its own thing (like Japan, Europe and pretty much everyone), the US dollar finds itself alone and with strong market pressure to continue to appreciate. After all, why would Europeans, Japanese and countries with weaker currencies not buy dollars and park their money here now that interest rates are going higher here than in their QE/0% interest rate home banks. The Fed has to figure out how to fight this flood of foreign currency into the dollar as the more the rates rise, the stronger the dollar will become. As citizens, we get more purchasing power abroad (time to go on vacation!) but this leaves multi-nationals and export dependent businesses in a tough spot.

For further analysis on the NASDAQ, DJI, RUT, Gold, Silver and Oil please visit http://www.ewaveanalytics.com


Short Term Trend = Bearish
Medium Term Trend = Bearish

Long Term Trend = Bullish

* Trends are not trade signals. Trends are posted for situational awareness only and does not take into account wave counts, technical or fundamental conditions of the market. While mechanically trading the posted trends is feasible, keep in mind that these are lagging indicators and as such are prone to whipsaws and I personally do not use nor recommend them to initiate or close positions in the market without taking into consideration other factors.