ELLIOTT WAVE

Two Counts For The S&P 100

05/09/11 08:53:47 AM

by Koos van der Merwe

Elliott waves are only a signpost in the wilderness and can change at the next sign.

Security: OEX
Position: Accumulate

I have always believed that Elliott waves are only a signpost in the wilderness of technical analysis, and that one should never become fixated on a particular count but should be open to a change as the market develops. Toward this end, I offer the following two versions of a wave count for the Standard & Poor's 100. Only time will tell which version is correct. For the short term, though, both versions are bullish.

FIGURE 1: S&P 100, DAILY

Graphic provided by: AdvancedGET.

Figure 1, a daily chart of the S&P 100, suggests that the wave is tracing a wave (iii) of wave 3 of wave 3 of wave III. Sounds complicated, and it is, but it follows the first rule of Elliott wave theory. It looks correct. Wave III must be greater than wave I, which means that there is still some way to go before wave III is complete. Do note that the relative strength index (RSI) is showing strength.

FIGURE 2: S&P 100, DAILY

Graphic provided by: AdvancedGET.

Figure 2 of the S&P 100 suggests that wave III is complete. Should this be true, then wave III is shorter than wave I, which means that wave V will be shorter than wave III, and difficult to project its top. Once again do note the RSI, which is suggesting strength.

Whichever count is the correct one, and only time will tell, both are looking positive, with Figure 1 for the long term, and Figure 2 for a shorter term.

Koos van der Merwe

Has been a technical analyst since 1969, and has worked as a futures and options trader with First Financial Futures in Johannesburg, South Africa.

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ELLIOTT WAVE

Two Counts For The S&P 100

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