Friday, May 13, 2016

Elliott Wave Stock Market Update - May 13

The sell off today puts a potential bearish 5 count in play. Prices closed right at support but the pattern looks bearish and the wave today could be a bearish W3 that could go right through support on Monday. Going by the length of what would be labeled a W1, a bearish 5 count targets 2007 or basically the 200 DMA at 2012. I wanted to go long yesterday before the bounce but given the pattern today, I will be waiting at the 200 to go long again.

Lastly, I was checking PE ratios last night and I noticed the PE for the S&P500 is at 23.6 which is higher than the Nasdaq. The Russell 2000 is at 400+, with some claiming it is negative so it shows as "NA" on some financial sites. To put this into perspective, at the height of the "bubble" in China last year, its SP500 equivalent was 20 and its small cal was 250, now those PE numbers are down by half. So while I think the economy is doing fine, the market is expensive and one more crazy run to higher highs would set up the market for a reversion to the mean sell off. The mean is 15.50 or about 35% assuming lower than the current PE ratio. A quick calculation puts the SP500 at 1333 as the current mean for the market.

Have a great weekend!

For further analysis on the NASDAQ, DJI, RUT, Gold, Silver and Oil please visit

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.

Elliott Wave Analytics

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