The collision of global markets and social mood

Tuesday, June 30, 2015

Tuesday -- Shanghai Recovery, Trial Balloons, Ah Ha Moment

ES Futures:
Rebounded an exact (& healthy) 61.8% of yesterday's decline.

News:
Life after reaching a 38% retracement level -- China's Shanghai Composite rebounded 400 points after being down 5% to close up 5.5%, its biggest daily swing in over 20 years. For now, the uptrend is still intact.

Rumors of last minute offers and dealmaking in Europe and Greece.

Rumors of globally coordinated central bank policy being floated by The Washington Post, a Jeff Bezos production, which is basically a Bilderberg production.

The Fed may play second fiddle to the IMF and the BIS? This could soon be the beginning of formalized centralized central banking.

Watch the full CNBC trial balloon video right here.

FX:
Safe haven flows coming out of CHF.

Treasuries:
Largely held price, but not convincingly.

Energy:
WTI crude still hovering at the 23.6% level. NG still confused about higher or lower.

Metals:
Gold still out of it -- 1168s

S&P Outlook:
Yesterday had everything the bears needed. Volume, price destruction, breadth, fear. It was all there.

It wasn't about Fibs or wave structure; it was basically a test of the 200dma. And so far it was successful.

And I still feel like it's yet another bear trap.

I've been uneasy about the lack of Elliott rules and guideline concerning ending diagonal patterns for some time, and have been operating under the assumption that wave 4 cannot move below the fulcrum of wave 3 (in this case, 2039.69). That's why I've placed such a Big Deal on that level.

Well, I did some digging and found what I was looking for: an old Elliott Wave Theorist by Robert Prechter which gave specific rules and guidelines for ending diagonals not found in his current edition of the Elliott Wave Principle with A.J Frost.

Get this:

Wave 4 never moves beyond the end of wave 2.

Waves 2 and 4 each usually retrace .66 to .81 of the preceding wave.

Ah ha.

While wave 2 was "strong" and didn't retrace nearly .66, wave 4 could do so & easily dip below 2039.69 all the way to the 2010 area as long as it held 1980.90.

Here's what it could look like:


Obviously, it could turn around without testing lower. And with EOQ window dressing, pre-holiday bullish bias, an open gap at 2101.49 and a huge volume shelf at the 2104 area, why not.

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