Wednesday, July 30, 2014

Still Hanging Around

Beginning with the long-term analysis of the waves, there is again nothing to add to the detailed analysis found in this update.  A sideways correction from 2014 [iii], an impulse unfolding since 2014 [iv], and a pullback of similar size of (2) following (5)’s completion followed by another impulse higher following are the strongest options if the one illustrated above in color is not taken into account.  But by a fairly wide margin, the wave count in color above is preferred.

Due to the large size of an underway sideways correction from the wave [b] high relative to the previous possible corrections since (4), and taking the larger structure since (4) into account, a correction that began at 3 or [b] is very likely complete.  [d] is clearly not 5 waves so a sideways correction is not beginning from that point unless it is part of something larger beginning at a previous high.  Keep in mind that an impulse higher from [ii] to 3 is possible and this opens the door to a possible flat lower since [b], but the structure of this impulse is very poor, [b] is used as an impulse which is not natural, and the side of [a] is then very small relative to [ii] which it would need to be paired with.
The best option for a continued climb higher is an impulse or ending diagonal wave underway since 4.  The problem with this however is the lack of respect for the ~1965 support area on an intraday basis.  The area was violated as a very large and deeply retracing wave lower since (5) has been unfolding.

At first the 3-wave looking move down to [b] this week followed by a structure resembling 5 waves higher gave a bullish look to the market.  However the breakdown that followed has moved the short-term expectation back to the bearish side.  A double zigzag down from 5 to (i) is a good option, but the surrounding context brings doubt to this possibility.  Again, the size and retracement level of the sell-off relative to 5 is a problem, but also the action today following (i).  i is very large and deep relative to the pause within (ii) and these is not a typical feature of a series of 1-2 waves higher; the corrections of waves tend to be no larger than the corrections of the larger waves that they are contained in.  Wave (ii) retraced a large amount of (i), but it is about the same size as [ii] and the waves following (ii) are strongly on the bearish side.
Of the wave counts that try to make an upward correction higher since 1 or [b] live on, the best involve a double or flat since 1.  These again face the challenge of dealing with waves after (ii) however and have an added layer of complexity which is not desirable.  Perhaps there is an ending diagonal underway since (i), but this is a stretch.
A complete impulse down since 2 would simplify the situation and work better with the action after (i) (and also allow for an additional rally above (ii) perhaps fully retracing (i)), but it would be very unusual.  There are just so few waves to work with at the bottom of the action today when attempting to balance out the [ii] region.  Better is an impulse down from (a) of [ii] to (i) but this also requires corrective waves that are out of proportion with one another.
As it has no structural problems, although it is a rare pattern, perhaps the best option worth considering besides the one in color is a 3-3-3-3-3 leading diagonal lower since 5 where its 4th or 5th wave is underway.  This allows a move above (ii), but not by much (wedging must be preserved).

Friday, July 25, 2014

An Important Day

The action on Friday proved to be important for determining a set of possibilities that suggest where the market is likely heading in the near term.  There is more to say in the shorter-term scales than last time.
But before going into these details, note that the long-term picture remains unchanged.  For a detailed look at the reasoning behind the following summary below, please refer to this update.
"First, a sideways corrective wave lower from 2014 [iii] is a reasonable possibility worth considering when used as a 4th wave that is paired with 2nd wave [2].  But the problem with this sideways correction is that price has rallied so far above [iii] with the ‘b’ wave being quite large relative to ‘a’.  So it has been labeled “weak”, but just barely given that the larger impulse structure it is a part of is not bad.
An impulse higher unfolding since 2014 [iv] is weaker than the sideways pattern due to its complexity and the structural concerns within the larger impulse higher since 2011.  This possibility is on-par with a pullback of similar size of (2) following (5)’s completion, then another impulse higher following; or a 2010-11 triangle with impulse higher completing at (5).
The poorest options involve an additional stretching of the impulse wave higher since 2011 where a 5th wave extension is taking place or the core of the impulse wave is in wave 5 territory.  These are the remaining options discusses above."
It should go without saying that the same options exist for the wave higher since 2009.  Namely a developing zigzag or impulse where the zigzag option has been weakening as price continues higher.

Last time it was reasoned that the downward sideways possibilities since 3 or [b] are weak because of their size and the structure since (4).  The rally that has unfolded from 4 to (5) can now be a zigzag which lets a sideways correction continue and perhaps terminate sooner than expected, but this offers little benefit to these options.  For example the quickest way of terminating an incomplete pattern would be a quick test of the 1950s for a flat down since [b] ([d] is not 5 waves so a correction cannot begin there).  Then the weak impulsive option in the chart above must be used.  A correction since [b] is then large relative to all other corrections since (4) and of course there are all the structural problems with this option; e.g. using [b] as a 5-wave move and [ii] to 3 as a 5-wave move.  These structural problems are eliminated if a sideways pattern is underway since 3, but then this pattern is clearly huge relative to any consolidation period since (4).
With a correction very likely ending at 4 and the structure likely unfolding as drawn above (the other option worth noting for action following (4) is the impulsive one in text in the chart above, but this is very weak), the most important thing to pay attention to is the action following 4.

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Wednesday, July 23, 2014

Trend is Intact, but for How Long?

The action since the last update does not change the long-term possibilities.  In this update the options for wave counts higher beginning at [2] were discussed in great detail.  A sideways corrective wave lower from 2014 [iii] is the next best possibility after the one above in color, but its 'b' wave is very large relative to 'a'.  An impulse higher unfolding since 2014 [iv] is weaker than the sideways pattern and the options involving an additional stretching of the impulse wave higher since 2011 where a 5th wave extension is taking place or the core of the impulse wave is in wave 5 territory trail the field.
Since the 2009 low, a zigzag wave higher is possible, but this is growing weaker as price continues higher.  It will also not be until the 1500s are breached that there can be an improved chance given to this option.

In the medium-term, an impulse higher developing since (4) is still by far the most probable option.  The advance to a new all-time high this week brings to mind the possibility of an additional test of the 1940s/50s support, but this fits poorly into the larger picture.  Given that there essentially cannot be an impulse higher from [iv] to [b] (looking for an impulse from 2 to [b] so wave 2 can be paired with a 4th wave underway since [b]), allowing an "extra" 5th wave in the [b] position does not fit into the larger count ([b] looks very much like a 3-wave pattern), and the sideways consolidation period since 3 is already large in relation to the previous corrective corrective periods before it, the chances of a re-test of the 1940s or 1950s before the market continues higher is poor.
An additional reason why [v] and [b] are likely not 5th waves can be explained as follows.  Unless (a) to (c) of [ii] is a 1st and 2nd wave, or 2 to [b] is an impulse wave (following the weak impulse option above) the possibility makes no sense.  The former is very unlikely due to the structure of (a) to [ii] that nearly fully retraced (b), and if this is correct, the size of [b] to 4 is already larger than all corrections higher since (4).  The latter faces a similar problem where a correction beginning at [b] would likely grow to a size larger than [i] to [ii] when complete (but it already makes [a] and 2 look small), but remember also the structure of [ii] to 3 is very hard to imagine as an impulse wave.

To help solidify the view that there is not a corrective wave higher since [e], consider the chart above.  It is a struggle to imagine either a 3- or 5-wave pattern complete since [ii] or a single, double, or even triple zigzag complete since [e].  An ending diagonal underway since [ii] with '1' to (i), '2' to 1981, '3' to i, '4' to ii, and '5' underway is possible, but this would be an unusual pattern with (i) so impulsive-looking and large relative to the other motive legs.  Maybe there is a zigzag developing since [ii], but wave [i] strongly resembles an impulse where its corrective legs are smaller than some of those contained in post-[ii] waves.
The wave action higher since [ii] looks most like an impulse wave to (i) with at least one additional 1st wave following (like the wave count in color above), or a sideways corrective wave underway since (i).  Both possibilities share similar probabilities with perhaps the option for a corrective wave underway since (i) taking a slight edge.  Note that a structure like the one above in color does not suggest a 4th wave to be paired with [ii] is underway since (i), although it is possible weakly.  A 4th wave underway since (i) would likely look better in relation to [ii], but remember that wave (i) is shorter than [i] and it is typical for 3rd waves to be larger than 1st waves.

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Here is an additional thought of mine from Elliott Wave Analytics:
Yesterday Elliott Wave International put up a publicly accessible chart on their Facebook page expressing their view of short-term action while pushing their new U.S. Intraday Stocks Pro Service":  This is the chart below:

While their call for a bottom at c is in line with action that followed, a few things struck me. First, wave 4 terminates in wave 1 territory which is a violation of the rules, therefore there cannot be an impulse down since b as described.  And if there is no impulse wave c, then the flat pattern they are suggesting is also not valid.
Second, even if there is a flat like they suggest (from [b] in my charts) there are the major structural problems that I highlighted and discussed deeply above; namely all the problems that go along with either [v] and [b] needing to each be 5th waves, or [iv] to [b] an impulse wave.  Actually this gives them the benefit of the doubt.  I suppose they could have a flat from 3 to [c] for wave a which would be much crazier.
The observations this "pro" service arrives at are quite disappointing.  End of the day, I am proud to put my name on my work because of the amount of thought I put into it.  This is behind the quality and high degree of predictability relative to other services that I and the others on this site strive for.  Thank you for being a member.