7/13 Daily Commentary

I am holding very small short position on the belief that the wave up from last Thursday's low is done.  It covered 850 DJI points in the futures and a minimum retracement can be expected of 200 points.  I shorted on the way up.  The Intel anticipation kept a float under prices, but the market sold off anyway in the final half-hour.  They announced better than expected and prices came back to their highs for the DJ futures.  The Nasdaq futures registered significantly better highs.  Overnight, my stop is at the DJ futures 10,366, which is 13 points above the day session high 10,353.  This stop will be for half of my 4% short futures position.
I1 is up, so why short?  To answer this a few elements will need to be discussed.
First, the DJI came up to touch and exceed it's 220-day M/A.  I started shorting at the 220-day M/A level. The 220-day M/A gravity well is 150 points, so I am good to 10,450.  Next, the DJI came to touch and slightly exceed the 56-day M/A which operates for an additional 100 points, good to 10,460.  So, they both give the same outer envelope.
Second, the extent of the completed 5-wave gives plenty of room for a profit even if I don't catch the top. The DJ futures have gained 850 points for this 5-wave. 
Third, even though I don't believe that the entire move from the low is complete due to I1 rising,  Elliott Wave International is pounding the table that this is a completed ABC and that the 3rd of a 3rd is imminent.  It seems prudent to put a small short position on in case they are right and I'm wrong.  The count below differs somewhat from EWI but both resolve to a completed 5-wave:

There is another element in my research that I have not publicized.  The longer-term trade strategy Longer Signals using Time Elevations employs a derivative of the I1 data.  It includes a set of I1 components and other data sources that have been shown to generate reliable signals when at elevated or depressed levels for prolonged periods.  I have been optimizing this data source with a 14-day M/A and have discovered that there is a 2-stage life to most market movements, the mid-move bottom and the inflection-point bottom and almost all market movements contain both.  I have not updated the Time Elevations page with this research as I am still working on it.  I'll present a series of charts as talking-points for this phenomenon.  First the 1987 chart:

The bottom signals are two-fold, The sell signal starts at -3 and has 2 bottoms, first when the index bottoms and second when it recovers back to between -4.5 and -4.25 .
Top signals are two-fold.  The buy signal starts at +2 and has 2 tops, first when the index tops and second when it declines back to +4.5.
In the above chart the initial decline was reflected in the nominal low -6.75 and the second bottom on the recovery back to -4.5 caught the secondary low after the crash.  There is another sell signal that caught the intial low at 5.75 and caught the actual price low on recovery to -4.5.
This also occurred reliably during 1990 and 2000-2002.

Here is the 1972-early1974 chart:

The late 1974 move was accompanied by extremely low values for the data series, such that the final low was accompanied by a return to -9, or -4.5 times 2.  The following chart, in order to capture the data series has data values divided by 2:

 

The current chart timed the bottom on 7/2 and is -4.25 tomorrow or Thursday.  We'll see.