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  • Sean HymanSean Hyman
    Keymaster
    Post count: 5577

    The S&P futures are heading lower in overnight trading, as tech earnings didn’t turn out as positive as investors wanted and it started some selling pressure after the bell in some of the most widely held tech names. More on that in the link above. Here’s what it looks like right now.

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    Sean HymanSean Hyman
    Keymaster
    Post count: 5577

    A little Elliott Wave info for you:

    Elliott Wave Personality & Characteristics

    Wave 1: Wave one is rarely obvious at its inception. When the first wave of a new
    bull market begins, the fundamental news is almost universally negative. The
    previous trend is considered still strongly in force. Fundamental analysts continue to
    revise their earnings estimates lower; the economy probably does not look strong.
    Sentiment surveys are decidedly bearish, put options are in vogue, and implied
    volatility in the options market is high. Volume might increase a bit as prices rise, but
    not by enough to alert many technical analysts.

    Wave 2: Wave two corrects wave one, but can never extend beyond the starting
    point of wave one. Typically, the news is still bad. As prices retest the prior low,
    bearish sentiment quickly builds, and “the crowd” haughtily reminds all that the bear
    market is still deeply ensconced. Still, some positive signs appear for those who are
    looking: volume should be lower during wave two than during wave one, prices
    usually do not retrace more than 61.8% (see Fibonacci section below) of the wave
    one gains, and prices should fall in a three wave pattern.

    Wave 3: Wave three is usually the largest and most powerful wave in a trend
    (although some research suggests that in commodity markets, wave five is the
    largest). The news is now positive and fundamental analysts start to raise earnings
    estimates. Prices rise quickly, corrections are short-lived and shallow. Anyone
    looking to “get in on a pullback” will likely miss the boat. As wave three starts, the
    news is probably still bearish, and most market players remain negative; but by wave
    three’s midpoint, “the crowd” will often join the new bullish trend. Wave three often
    extends wave one by a ratio of 1.618:1 or more.

    Wave 4: Wave four is typically clearly corrective. Prices may meander sideways
    for an extended period, and wave four typically retraces less than 38.2% of wave
    three (see Fibonacci relationships below). Volume is well below than that of wave
    three. This is a good place to buy a pull back if you understand the potential ahead for
    wave 5. Still, fourth waves are often frustrating because of their lack of progress in
    the larger trend.

    Wave 5: Wave five is the final leg in the direction of the dominant trend. The news
    is almost universally positive and everyone is bullish. Unfortunately, this is when
    many average investors finally buy in, right before the top. Volume is often lower in
    wave five than in wave three, and many momentum indicators start to show
    divergences (prices reach a new high but the indicators do not reach a new peak).
    Wave A: Corrections are typically harder to identify than impulse moves. In wave
    A of a bear market, the fundamental news is usually still positive. Most analysts see
    the drop as a correction in a still-active bull market.

    Wave B: Prices reverse higher, which many see as a resumption of the now longgone bull market. Those familiar with classical technical analysis may see the peak as
    the right shoulder of a head and shoulders reversal pattern. The volume during wave
    B should be lower than in wave A. By this point, fundamentals are probably no
    longer improving, but they most likely have not yet turned negative.
    Wave C: Prices move impulsively lower in five waves. Volume picks up, and by
    the third leg of wave C, almost everyone realizes that a bear market is firmly
    entrenched. Wave C is typically at least as large as wave A and could extend as much
    as 1.618 times wave A.

    Basic Rules
    There is 3 basic rules in 1930’s (Old) version of Elliott Wave Principle which are
    listed below
    1) Wave 2 always retraces less than 100% of wave 1.
    2) Wave 3 cannot be the shortest of the three impulse waves, namely waves 1, 3 and
    5.
    3) Wave 4 does not overlap with the price territory of wave 1, except in the rare
    case of a diagonal triangle.

    Christiaan VlasblomChristiaan Vlasblom
    Participant
    Post count: 260

    Best summary of Elliott waves I have seen so far. Printed it and put in on the wall in my home office.

    Sean HymanSean Hyman
    Keymaster
    Post count: 5577

    Awesome. I copy/pasted it from somewhere but I liked it too. It’s a reminder of things like: how the news is, during those times. I know y’all have heard me talk about it like that, but it’s still a good reminder.

    Sean HymanSean Hyman
    Keymaster
    Post count: 5577

    I show 11/9 as the ex-date on https://www.dividendchannel.com/history/?symbol=ibm and on my Think or Swim charts.

    $1.63 per share dividend. Love it!

    Sean HymanSean Hyman
    Keymaster
    Post count: 5577

    There’s a huge chance that the bubbles are starting to burst in these high-tech stocks. That’s important because of their weighting in the S&P 500. So these stocks have a bigger impact, because while it’s 500 companies…it’s not 500 equally divided companies. These stocks hold a higher weighting/percentage of the index. Just the top two are huge %’s for just two stocks in the index.

    https://www.investopedia.com/top-10-s-and-p-500-stocks-by-index-weight-4843111

    Additionally, I believe the Tesla bubble is likely popping now too.

    Sean HymanSean Hyman
    Keymaster
    Post count: 5577

    We’ve got a “lower high” on the S&P 500 index and if the market falls below 3200 and holds for any length of time, then we’ll have a bonafide “lower low”, and if that happens, that’s some of the earliest signs of the next leg lower.

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    Sean HymanSean Hyman
    Keymaster
    Post count: 5577

    Remember when I’ve said the NASDAQ today is like the NASDAQ/tech bubble of 2000? Well, here’s a great chart that shows that.

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    Sean HymanSean Hyman
    Keymaster
    Post count: 5577

    The response to COVID (shutting down the economy, pushing some companies out of business, etc.) could be the pin that pops the bubble. We’ll see.

    Since Apple is so widely held and is in all of the major indexes (Dow, S&P 500 and NASDAQ), if it drops well below $103, we’ll likely see a lot of stops hit and a huge wave of selling speed up in that stock, which will have a huge weight on the overall economy. It will also continue to influence the other former high-fliers lower.

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    Sean HymanSean Hyman
    Keymaster
    Post count: 5577

    Toward the latter stages of an uptrend, when prices get stretched far above their 200-week moving averages, near or at top Bollinger Bands and with MACD sell signals, you know the downside risks are high. And one of these, will revert it into a downtrend which will end up taking the S&P 500 FAR below its 200-week moving average.

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    BekkaBekka
    Participant
    Post count: 311

    LOVE the Elliott wave review and also copy and pasting in my SH folder!!!

    Sean HymanSean Hyman
    Keymaster
    Post count: 5577

    Ha-ha. Love the Sean Hyman folder. That thing is going to be worth gold one day. ha-ha. Pass it down to your lineage over time.

    Leslie HarvathLeslie Harvath
    Participant
    Post count: 347

    Oh, Sean! Thanks so much for the Elliott wave info in print form. I absorb info much better in print than auditorily, so this increases my understanding 100-fold.

    Sean HymanSean Hyman
    Keymaster
    Post count: 5577

    The NASDAQ will be interesting to watch because its the “king of bubbles” right now, as it concerns the 3 major indexes. Once it drops below 10,500…people will most likely be unloading tech stocks like there’s no tomorrow. And that will speed up the popping of the bubble as the next wave of selling intensifies. It will help to drag the overall stock market lower since these tech stocks comprise such large % holdings of the major indexes. Also, below 10,500 it confirms a “lower low” to go along with its “lower high” that it’s already put in place.

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    Sean HymanSean Hyman
    Keymaster
    Post count: 5577

    Awesome, Leslie. I’m glad that was so helpful.

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