The Truth and the Periphery: Tell Me GOOGLE, which way is the SP500 really headed?

The Truth and the Periphery: Trading the Elliott Wave

By TheMarketDetective.com

Tell Me GOOGLE, which way is the SP500 really headed?

GOOGLE is always an interesting stock to interpret and I have had some successes projecting its future price path. What is more interesting about GOOGLE is that I believe for the last few years it has been a good TELL of directional changes in the greater market.

So, when you have a reliable market TELL leading the market down, as it did on January 4th (the greater market turned on the 10th), and then lagging during the recovery, as it has since Feb 5th, a logical interpretation is that it is forecasting a directional change in the market.

Right click on chart (view image) to enlarge

I produced a complex Elliott corrective wave pattern for GOOG on January 24th and suggested that it was a probable completed pattern and hinted toward lower prices. I also said that I was unable to produce an Elliott Impulse/motive wave set up from the November lows.

In revisiting the chart of GOOGLE yet again, I was able to produce an Elliott wave motive count from the November low in 3 waves with the third wave being extended. The ratios for this count don't work nearly as well as the more complex corrective structure I previously interpreted, and it is even worse with smaller time frames, but it doesn't break any rules. It is important to note however, even though it is a motive structure, it is still only 3 waves (so far) and without a 5th wave, it is still corrective.

By studying this chart, there are some Fibonacci pivot points that will provide strong clues about the longer-term direction of the market. First, It should be no surprise that price found support into the market close today at the .618 Fibonacci retrace of the move up from 520 at 549. A rally straight back up from here would support the idea that a 4th wave was put in at 520. I give this a low probability.

Right click on chart (view image) to enlarge

More likely, it is an Elliott 5 wave set down from the high, followed by a 3 wave retrace, where c is a 1:1 Fibonacci extension of a as shown by the red stars, that slightly breached the .618 retrace level at 587. The perfect compliment to the this initial Elliott 5 wave set down, that would still present a credible 4th wave retrace, would be another 5 wave set down to about 483-488. This is the Fibonacci confluence zone of a 1:1 Fibonacci extension and .382 retrace.

There is another confluence zone highlighted around 530 between the .618 extension and a .250 retrace, but I would look for this to be more likely a pause than a turn.

A breakdown at 483 probably sounds fantastic to you I am sure, but a 50 point drop in one day probably seemed fantastic to you yesterday. GOOGLE beat on earnings and got slammed more than Goldman Sachs who the SEC is going after. If 483 breaks down, it will suggest to me that 420-438 is the next target and the corrective patten from from January 24th receives a strong endorsement.

One more thing, the market will follow GOOGLE.