Elliott Wave Update ~ 9 August 2012

The squiggles on both the Wilshire 5000 and S&P indicate a triangle has developed over the past few days:

Wilshire used for form. The wave i of (c) of [z] has been moved and looks better as it was not very proportional before. This count looks better so we'll go with it for now.

SPX count if Minor 2 remains below 1422 SPX:

There is quite a deviation between the S&P500 and Wilshire 5000 occurring at this time. Its probably the biggest deviation since the 2009 low. If the S&P500 makes a higher high above 1422 SPX, the Wilshire5000 will most likely not make a new high, at least not right away unless there is some significant follow through.

My take on this deviation (divergence) is bearish overall.

And why the divergence between the much broader Wilshire 5000 (which is virtually the entire market) versus the S&P 500?  Well one only need to look at the Russell 2000 to see why. It s only retraced 76.7% of its recent pivot low.

The small caps topped in April 2011, a full 16 months ago.

Of course the GDOW tells the real story worldwide: That things are deteriorating, not getting better. Its recent retrace from its pivot low is only 54.4%!

NYAD count, Note that the NYSE depicted as the indicator on the lower part of the chart, has not confirmed the new cumulative totals since April 2011.  

CONCLUSION:

The "main" indexes of the DJIA, S&P500 and even the NASDAQ Composite may be tantalizing for bulls because of their current price heights, but the underlying indexes are lagging and diverging noticeably. The global situation is lagging badly as indicated by the GDOW. 

My take is that the U.S. markets will catch up to the downside.  The rising wedges suggest that the downside catchup could be quite severe, quite fast and trapping as many bulls as possible.  I could be wrong on the rising wedges but one must respect their potential to indicate exhaustion in the markets.

Technically, even a cursory look at a weekly chart shows a double negative divergence developing in such simple indicators as the RSI.

Sentiment-wise, things are ripe enough for a major price decline.

I'm with Biderman on his thinking that when the collapse happens, it may very well happen overnight.