Wednesday, December 11, 2013
While not invalidated, there was a modification made to the primary wave count since the last update which moved the [C] wave ending diagonal completion to the high reached this week Monday. Regardless of this, the probability of a complete significant top actually increased since the last update while the many alternate options still remain.
While the options are overwhelming, the message that the market has sent the last few months is simple: there are several upward zigzags within the action that imply a market that has very limited upside potential in the coming weeks or months. If the primary wave count is not correct, there can essentially only be a complete or incomplete ending diagonal higher within the rally or a downward sideways correction since the October high. Note that every option contains an ending diagonal higher unless there is a sideways correction underway since the October high which is probably the worst alternate count. Ending diagonals are obviously trend-reversal patterns usually terminating patterns several fractal degrees larger than the one they are contained in, so the market should be completing some fairly significant wave. An impulse wave since a late 2011 low is the most natural choice of terminating significant wave given the daily chart above.
During the past several days, a clear 3 waves higher nearly made a new all-time high, but price pulled back in dramatic fashion. An impulse wave lower is likely complete or nearly complete at significant support. A downward flat following the November high is possible, but this only makes sense if an ending diagonal higher since 11/7/13 is underway. Remember that the 2nd and 4th wave corrections of ending diagonals are seldom sideways patterns.
Posted by Nate at 8:21 PM
Friday, December 6, 2013
Little has changed since the last update two days ago. In that update, the following was stated: "if the market rallies tomorrow to give a 3-wave look to the rally following today's low, keep in mind that an impulse wave down from the last all-time high to today's low is possible, but this is a questionable pattern. A better fit is a complex upward sideways structure underway since today's morning low." The wave count has been updated to make wave 2 a flat+zigzag double, what appears to be the best fit.
Even though today's rally retraced much of the preceding decline, the market still looks bearish on a variety of scales. For instance the rally higher since the Wednesday low has a corrective look. This reasoning revolves around this question: thinking ahead, where would the core of an impulse wave beginning at this week's low be? The early strong gap move higher (where the strength is) and small correction and rally after the morning's low (proportionality and momentum problem) work against an impulsive wave count.
The best, and essentially only, bullish wave count for price action next week is an ending diagonal underway since the 11/7/13 low. This wave count seems so complicated that it is difficult to imagine unfolding however. It also creates proportionality problems with the waves within the then required impulse unfolding from the 8/30/13 low.
The longer-term wave count options remain unchanged. The best options all suggest at least a multi-week pullback underway.
Posted by Nate at 5:00 PM
Wednesday, December 4, 2013
The primary wave count presented in the last update has been invalidated due to the sell-off this week. Upon reevaluation of the waves since 2009, the primary wave count has reverted back to one suggested here not long ago. The size of wave (5) of ending diagonal [C] is my main concern with the option as the all-time high of the wave count is only about 2 or 3 points short of invalidating the pattern ((3) cannot be the shortest wave within [C]). Now that the short term suggests the wave higher since the October low is complete, the option seems stable. The primary wave count is preferred over the alternate counts because it fits far better with the waves in late 2011, middle and late 2012, and even the 2009-early 2010 rally.
There was almost certainly an impulse lower from the Friday all-time high to the low reached this morning. Following this appears to be 3 waves higher, 3 waves lower to a new low for the day, then a rally of some sort. This pattern seems to be a flat and it looks complete due to the size of the selling into the close relative to the other pullbacks of the wave. If the market rallies tomorrow to give a 3-wave look to the rally following today's low, keep in mind that an impulse wave down from the last all-time high to today's low is possible, but this is a questionable pattern. A better fit is a complex upward sideways structure underway since today's morning low.
Posted by Nate at 7:39 PM