Elliott Wave Stock Market Update - January 5

The market sold off today and the count has now changed to reflect new possibilities. The wave from 1972-2093 was a very strong wave without any substantial corrections, which favor this sell off wave being a W2. But if we label 2093 as an intermediate top, then this bearish wave could be an A or a bearish W1. The key level to watch while the TA is negative is 1972, if that level is breached then the market will go into a much bigger correction. Also, the bullish MACD crossover from couple of weeks ago was reversed and bulls need to regain the 50 DMA and the TA to recover its bullish stance.

Fundamentally speaking, the sell off was caused because of the slide in oil which traded today in the range I was targeting for the triangle breakdown of $48-50. So oil looks like it is in its final wave before a bottom and once a floor is found, bulls might use stable or rising oil to charge again. And don't forget, all this extra cash generated by savings in gas will be translating into earnings. A headline that was missed today was the sales from automakers, which had a very strong December and the best year since 2006. Any business that benefits from discretionary spending will be reporting a strong Q4 starting next week. Lastly, China (who probably benefits the most from low oil prices) rallied 3.6% last night so bulls might just be setting up a bear trap again. I am holding my long positions (which fortunately are China related) and will consider hedging at a test of the TA just in case or maybe long oil if I see a finished 5 wave count from the triangle.

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 = Bullish

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.