Squawk Morning Briefing: No Excuses

The Elliott Wave apologists and complainers are starting to emerge.  Other advisory services that were regularly tracking the DJIA have shifted their emphasis to other indices that are not so close to their April highs.  We are hearing excuses about index composition; how if AAPL has been added to last year instead of CSCO that the DJIA would already have violated the highs.  The unspoken implication seems to be that if even less well performing stocks were in the index that we wouldn’t be flirting with a level that would invalidate counts which call for a turn.

Our point in bringing this up is not to complain about others, but to put forward the way we recommend using Elliott Wave theory.  We rely heavily on the framework and its rules because we find that they work.  The current wave count is not always obvious at the time, but there are clear indications of when we are wrong, or at least when we are lost.  Right now, this theory that has served us well is telling us two things:

1. The best interpretation we can find for the totality of the market movements going back to 2007 and beyond anticipates that we should continue down and do so before the DJIA breaks 11,258.01; and
2. Should we reach beyond 11,258.01 we will be lost.

However, we must contrast this with things the theory is not telling us:

1. This DOES NOT mean that prices are prevented from rising above 11,258.01.
2. This DOES NOT mean that if prices break above 11,258.01 that we will continue endlessly higher.

What it does mean is that if we break above the April highs is that we are lost and that the most important step when lost is to get one’s bearings.  In our experience, the wave count will eventually reveal itself.  When it is not clear, the markets are particularly dangerous to trade, and not only for Elliott Wave practitioners, but for all who are stumped by seemingly incomprehensible market action.

In the very short term, price action is not inconsistent with a turn that will satisfy the rules necessary to keep our wave count alive.  The move upward is extended and could count complete at these levels or slightly higher.  However, this means nothing without a confirmed turn.

We make no apologies for the theory we use.  Instead we listen to what it tells us.  Should we turn down with confirmation then we know what to look for next.  If we break into uncharted territory then we wait until things become clear.

Our focus today is almost exclusively on the DJIA.  This seems to hold the key. Our outlook on other markets remains stable since yesterday, and overnight futures action in the YM adds little to our understanding of the possible DJIA movement today.

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Elliott Squawk delivers thorough market preparation every morning in time to take action during the trading day. By combining up-to-the-minute futures activity with traditional end-of-day analysis from cash indices, you receive analysis based on the latest conditions as the trading day sets to open. Each issue of Elliott Squawk goes beyond traditional Elliott Wave analysis because we recognize that trading Elliott Waves is much more than just looking at the most likely current count. Squawk will prepare traders to assess the market action as it unfolds by answering questions that any Elliott Wave trader should consider:

• What price levels and wave motions would confirm an expected move?
• What price levels would make an alternate scenario more likely?
• What technical indicators should be watched throughout the day to interpret wave action?
• What intermarket movements merit special attention to understand likely price trends?

Markets Covered:

Each day Elliott Squawk will update the outlook for the following markets:

• The Dow Jones Industrial Average
• YM e-Mini Dow Futures
• The S&P 500
• The EUR/USD cross
• The U.S. Dollar Index
• U.S. Treasury bond futures

From time-to-time when circumstances warrant, Squawk will present analyses of other markets that help interpret wave action in a covered market. For example:

• If S&P 500 and Dow counts are ambiguous and NASDAQ behavior helps identify the likely next move then NASDAQ analysis will be presented.
• If the EUR/USD count is ambiguous and the USD/CHF cross helps us to understand what might happen then we’ll present the intermarket analysis the Squawk subscribers.

At the end of the day Squawk subscribers will receive a brief market recap that summarizes how the day’s events compared with expectations and what issues are likely to be analyzed in the following morning’s Elliot Squawk.

About the Analysts

Kevin McEwen and David Starr are best known to First Wave chat room participants as Kevy99 and Managematics and by their reputation for their Elliott Wave counts that have predicted market turning points. Kevin has been counting Elliott Waves for 28 years, successfully forecasting market moves in virtually every financial environment. David brings together talents in financial market analysis and software development to his wave counting. He has authored many of the studies used by First Wave Traders as well as a number of proprietary studies to aid in counting waves.

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