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": https://www.facebook.com/ElliottWaveInternational/photos/a.10150108635386575.295053.81391766574/10152566181706575/?type=1&relevant_count=1.  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.

Saturday, July 19, 2014

Still Rallying


As usual we being with an analysis of long-term picture and work our way into the smaller waves.  Since 2009 there is still the possibility of a zigzag-family wave unfolding, but the higher price travels the less likely this scenario becomes.  If a correction is unfolding a single zigzag is the preferred option where 'a' is to i, 'b' is to [2] as a flat, and 'c' is nearing completion.  Wave 'b' of the zigzag can terminate at (2) as a triangle, but as discussed in the past it is difficult to find a good impulse labeling higher since (2) where a sideways correction is not underway beginning at 2014 [iii].  A double zigzag would require a pullback of similar size to ii, then another rally putting price even higher as it completes this more complex pattern.
In this update the options for wave counts higher beginning at [2] were discussed in detail and the following was concluded:
"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.
The wave count in color is strongest because the other possibilities have at least one undesired feature that it does not have.  It stands out by a good amount in this regard."


The ensuing price action since the wave (4) low is very likely an impulse.  A double zigzag with 'w' to [iii] ('a' of 'w' to 1, 'b' of 'w' to [ii]), 'x' to [iv], and 'y' underway ('a' of 'y' to 3, 'b' of 'y' to '4') is possible, but the size of 'x' is small relative to the 'b' waves within the two zigzag legs and the pattern only works as an ending diagonal underway since the wave (4) low, a pattern not often seen.  Furthermore the large space between the April-May and June-July congestion areas that is [iii] is characteristic of an impulse wave, not a zigzag-family wave.
Last time it was stated, "1960-area support should prove to be the farthest that any selling travels (if there is still a wave 4 triangle underway...)."  Although this move appeared unlikely due to the short-term structure (especially after the morning drop and (x) of [e] wave), the structure of [d] not preferred as a double zigzag, and the fact that there was already a pleasing complete triangle structure to (x) of [d], price move to this level anyways and actually a bit under in a fear-like move.  The rebound was strong and the waves in the wave 4 region, particularity [d] and [e], look very corrective.  Unless 5 truncated as an extremely small 5 waves to [i] at the Friday high, the structure higher since (4) is not yet complete.
A correction in the wave 4 region can be incomplete, for example there can be a flat higher since [c] within a flat down since [b], but the region grows to a very large size relative to any correction that came before it since (4).  If a correction is still underway and if there is not to be a massive correction down still incomplete since [iii], there must be a impulsive subdivision as described above where 4 is underway since subdivided 3.  Clearly an extension of 4 only worsens the proportionality of it in relation to previous corrective waves.  Just one simple, quick move back down to 4 or [a] is very likely not enough to give a reasonable structure that is a different complete sideways correction.


The overlap of a of (y) and then total retracement of b of (y) give a very corrective look to wave [e].  5 wave higher since [e] that may be an impulse or just a set of 1-2 waves unfolded following the Thursday low.  A flat higher since [c] works with the structure seen over the past two weeks, but again the larger structure does not work well with it.

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Wednesday, July 16, 2014

New Highs Imminent


On Saturday the long-term options were discussed in great detail here.  Nothing has changed in the long-term so there is nothing to add to the long-term analysis.


Following wave (4), there is very likely an impulse underway that is in its final stages.  The wave 4 triangle above works very nicely with recent action with one drawback; wave [e] did not retrace much of 3 and is a bit small.  The alternatives are weaker however.
If wave [d] completed at today's high and wave [e] is underway, there is a loss of symmetry in the triangle (wave [d] is then bigger in time than [c] and the upper line becomes more horizontal (it is already more horizontal than the [a]-[c] line)).  The small wave after [e] also does not work in naturally; [d] and (b) of [d] are larger than the wave from [e] to today's high and the pause in the wave from [e] to today's high, respectively (wave [d] would need to be a double zigzag).
If there is an ending diagonal underway since [a], a test of 1965 probably needs to occur but this seems complex and unlikely given today's action (discussed below).  The 1965 expectation is arrived at through the following thought process.  Any move higher to make a new all-time high (required for this pattern) should remain under 1994 or so so the 3rd wave of the ending diagonal remains shorter than the 1st wave.  However to arrive at an impulse of zigzag higher since [e] that has any chance of being paired with [d] (even though [d] best resembles a zigzag) before 1994 is reached becomes very difficult to imagine.  There is just not much room for an impulse or zigzag to unfold in this [e] to 1994 region given the action already seen.  An ending diagonal since [e] would be the best possibility.  An impulse wave down for a flat since [d] would wipe the upward progress since [e] away and the ending diagonal pattern would have an improved chance but still not a good one; the depth of [c] is still deeper than is typical for ending diagonals.
A final option worth considering on the above scale is an ending diagonal that began at [iv].  It can serve as the 5th wave of an impulse higher that began at (4).  This pattern does not have such a limiting upper bound as an ending diagonal since [a], but it seems just as unlikely.  [v] subdivides by far the best as an impulse wave due to the great difference in size of the 'a' and 'c' waves.  Wave [b] has a similar problem but is not quite as pronounced.  In addition the 'y' wave subdivision that is [a] adds complexity to the pattern.  The entire wave higher since [iv] is large compared to 1 which brings the entire structure into question.  But if this ending diagonal is the correct wave count, 1965 could be tested.
The waves within 4 can be used to build larger corrective patterns that have few structural problems, but then the pattern becomes huge relative to waves 2, [ii], and [iv] or even 1 to [ii] itself, not to mention very complex.


A closer view of recent action shows some interesting characteristics.  Following 3-wave [e], the market showed two legs higher followed by a deep and large pullback.  This immediately calls into question the possibility of an impulsive rise higher following [e].  But the advance after (ii) retraced nearly all of (ii) including the very small 1981.5 resistance area, the last before the day's high.  This rise moved the pattern back to the bullish side.
There can be a double zigzag higher from [c] to (ii), but again [ii] is smaller than (b) and [e] to (i) is smaller than [d] making the possibility questionable and not as desired as the one above in color.  Perhaps better is a flat lower developing from [d], but the rise following (ii) looks least like the 2nd wave of such a move.  A triple zigzag higher since [e] is possible where 'c' of 'z' is underway, but triple zigzags are rarely seen.
Considering the structure of the post-[e] waves where (ii) is larger than [ii] (typically corrective waves are no larger than the corrective waves of the next largest degree wave), there can be an ending diagonal underway since [e] where its 3rd wave or 'y' of is 1st wave is underway.  This pattern allows a test of a sub-1976 level such as support in the 1973 area.  If its 3rd wave is underway, the size of 5 will then fairly small relative to wave 1 so this pattern is not very desirable.

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