Wednesday, April 23, 2014

4/23/14 Elliott Wave Update

In the long term, the Elliott wave options remain the same.  A double zigzag higher since (2) is possible within a sideways correction that began at the wave (1) high, but this option is not strong due to the complexity and lack of proportionality between the waves of the pattern, regardless of what they end up being.  If there ends up being a new all-time high without reaching a new short-term low first (something at or below ~1815 support), the ending diagonal options above will clearly look like the most strong options.  As mentioned in previous updates, ending diagonals are usually not the 5th of 3rd waves of an impulse.  Therefore, an ending diagonal would signal the end of an impulsive move higher that began in 2011.

An incomplete impulse higher since (2) is not strong due the the strange flat wave required between A and (4).  The waves lower since the last all-time high best resemble something corrective.  A deep retracement of this pullback has followed which supports the idea of a complete corrective wave lower since the last all-time high.  A flat higher since the W low is still a possibility, but it is growing weaker day by day due to the retreacment that has been achieved.
Other options since (3) are weaker.  A flat down still developing since (3) is possible, but consider what was found above; the ending diagonal options in the first chart would look strong if the wave higher from (4) continues to a new all-time high.  It would be very rare to see a sideways corrective wave within the 2nd or 4th waves of an ending diagonal.

It is important to note that (i) is longer than (iii).  This fact might seem to suggest an impulse higher is complete, but wave (i) was clearly the weakest of the three legs which speaks against the option; the strength of the legs should be just the opposite in an impulse wave than they currently are in this possibility.  On the other hand, a 3rd wave is usually longer than its 1st and 5th wave counterparts which is not the case with the wave count in color above.  In this option wave (iv) is also quite large which creates an undesirable feature.
From (4), there can be a complete zigzag higher followed by a correction perhaps incomplete.  This counts much better than the other possibilities.  If there is an ending diagonal unfolding since [4] or later, a double zigzag starting at (4) works fine as only single zigzags higher have likely been seen thus far (this provides alternation, a typical feature of the actionary legs of any wave).  If wave 'x' of a double zigzag is underway since (iii), the expectation is for a pullback or base to form so the market has enough energy to move higher again beyond the last all-time high and there is a good size relation between the wave higher from (4) and wave (3).
Bottom Line:
Last time, the following was stated: "It is the sideways and ending diagonal options that clearly stand out as the best options.  While at this point it is difficult to say which is correct, new all-time highs are expected in the near future before any meaningful sell-off.  So there is a very strong long play in this market.  1740 support is the lowest this market should go before challenging new all-time highs again due to a lack of bearish possibilities."
As discussed above, the sideways option since (1) is now not so strong due to the waves seen this week.  This suggests that 1740 will not be seen before another all-time high.  In fact even a test of 1815 will not look that bearish anymore.  There is likely an ending diagonal underway since a point at or after [4].
In the short-term, it is difficult to say what is exactly happening, but the lean is towards a complete wave higher at (iii) reached 4/22.  Regardless of what it is, the wave beginning at (4) should be part of a larger zigzag-family pattern higher developing which will reach a new all-time high.  At this time, the waves do not suggest an impending correction of anything substantial.

Saturday, April 19, 2014

4/17/14 Elliott Wave Update

The options in the longer term remain the same but with one addition: an impulse higher following the wave [4] low.  If there is a sideways correction underway since the wave (1) high, it works very well as the 4th wave (last corrective wave) of an impulse higher that began at the 2011 low.  The only other reasonable way of using a correction in this position is as the 4th wave within an impulse higher beginning at [4], but this is a weak possibility due to the lack of proportion between it and the 2nd wave of the move.

The rally last week labeled as [a] now strongly resembles an impulse that is complete or in its final stages.  This wave still gives rise to various possibilities since the last all-time high which are listed above.  The flat higher since W is still preferred over a correction beginning at Y sue to its simplicity.  The triple zigzag wave (4) may seem complex, but structurally it actually works very well.

There is very nice symmetry to the advance since Tuesday where the gap higher on Wednesday was the core of the move.  The wave crossing at the close, and overlap of all waves after the core, strongly suggest the move is complete or nearly complete and a correction will begin.
If the correction moves under support in the 1840s, the correction since the last all-time high is likely incomplete.  If incomplete, this larger correction means prices will move back down to the 1810s, then perhaps under this level.  If the 1810s hold or are broken slightly (maybe 1800 is reached), the ending diagonal options since [4] in the first chart remain in play.  If prices stay under support and wedging is lost invalidating the ending diagonals, look for a sideways correction underway since (1), the January high.  As discussed above, a sideways correction in this position is probably the last corrective wave) of an impulse higher that began at the 2011 low
If there is an ending diagonal underway since [4] or a point after [4], this pattern is probably terminating the impulse higher since 2011.  This is not due to the structure as it can easily be labeled as a termination of a third of a third wave (for example just use the colored labelings above but use [C] of b as the starting point of the impulse).  The reason is that ending diagonals usually terminate patterns of a larger degree than the ones that they are contained in.
It is the sideways and ending diagonal options that clearly stand out as the best options.  While at this point it is difficult to say which is correct, new all-time highs are expected in the near future before any meaningful sell-off.  So there is a very strong long play in this market.  1740 support is the lowest this market should go before challenging new all-time highs again due to a lack of bearish possibilities.

Wednesday, April 16, 2014

Wednesday 4/16/14 Elliott Wave Update

Last time, there was the following statement: "the expectation is for a bounce to 1835-40 whether or not prices retreat to just under the Friday low first...If prices move directly to 1835, that would be a signal for lower prices to come as an upward sideways correction would look probable".  Prices did advance to 1835 and this move in hindsight is very likely part of a sideways correction; while there was never a break of Friday's support, a test of the Friday low followed, missing a new low by only about 1 point.  How this and the additional rally and support test fit into the larger picture will be discussed momentarily.

A different look at the long-term picture than illustrated last time is above.  All the same options still exist but some of the colored and horizontal line possibilities have been reversed (remember that there are no primary/alternate wave counts used at this website, there are only options listed; these are then used to form a view that is a probability distribution).
Notice how the triangle [D] and [E] waves work better with the structure.  There is a lot to be said for a zigzag structure in wave (1) of [5] instead of an impulse.  On the other hand, ending diagonals are fairly rare patterns.

The congestion area at the 1815 support area is interesting because of what it means to the larger picture: for the reasons below, it strongly suggests the wave in the (3) position is a zigzag with corrective waves following.
There cannot be a complete zigzag down from the last all-time high which makes a flat+zigzag double since the A high unlikely.  While there can be a flat higher since W to make the 'b' wave of the zigzag in this double, this puts the zigzag fairly out of proportion with the flat.
When considering a flat higher since W, it fits as a 'b' wave or a 2nd wave if the market is still completing a wave lower since the last all-time high.  This flat possibility is preferred over a correction self-contained since the Y low because of its balance and proportionality.  It also has the consequence of being most simplistic among the short-term bearish options.
Besides the weak double option mentioned above, there seems to be only one other way of keeping the impulsive option alive since the low at wave (2).  This is a flat since the A high where there is an ending diagonal lower following the wave (3) high.  The flat has many structural problems throughout with the wave XX flat being one; it is extremely rare for the corrective waves in ending diagonals to not be zigzag-family patterns.
A sideways correction underway since (1) is still a possibility.  The two best ways to work in the waves since (3) in this regard is through the upward 'b' or '2' flat discussed option above or 'x' wave flat or double since the Y low.

The rally from the (4) low can be a complete 5-wave pattern, but then it must be an ending or leading diagonal.  A pullback beginning on Thursday can also be 'c' wave of a flat.  This rally can continue higher before stopping, but the structure and momentum suggest a pullback is coming rather than an impulse wave still unfolding.
To summarize, the ending diagonal option since the wave [4] low looks great, assuming the low reached this week holds.  The other few other ending diagonal options also find importance at this level.  If that level breaks, the waves ensuing after the wave higher in the (3) position, which is very likely a zigzag, can draw out a variety of patterns.  Action like this to the downside is suggestive supports a sideways correction underway since the January 2014 high which still has a good probability, but it of course weakens as prices move higher.  The long-term count since the 2009 low is still irrelevant from a trading perspective as all options suggest another new all-time in the near future.