The count has been modified since Thursday's Update, but the larger view, that an impulse since 7/1 is unfolding, has not changed.
The new set of labellings above is a bit unusual in that wave (iii) has been significantly retraced. This is actually in line with the view that the 'c' waves of flats are often sloppy impulse waves that break guidelines without breaking rules. The 2nd and 4th wave pairings above alternate which is typical for an impulse wave. For example, the wave (ii) and unfolding wave (iv) suggested are actually quite complementary in size and pattern.
Wave i of (iii) can be labeled as an extended 1st wave longer than iii, so a small wave v of (iii) makes sense. Wave v of (iii) was smaller than guidelines suggest, however the winding down of the 3rd wave rally was actually quite reminiscent of the labeled wave (iii) of the 6/8-6/21 rally. The large labellings are now labeled differently in this historical chart, but the impulsive count within that rally has not changed.
The decline on Friday seen in the 1 minute chart above brings to mind the Friday 6/4/10 sell-off not long ago. Both began with a breakaway gap followed by a short bounce, then a choppy sell-off into the close. There was also a sudden drop just before the close followed by a sharp bounce that partially retraced the drop in both these cases. That sharp drop seen last week Friday just before 3:30 was likely the "3rd of a 3rd" wave of the decline following the 11:00 bounce in the morning. This is the same pattern seen Friday 6/4. Because of this interpretation, there should be a wind down of the impulse wave since the 11:00 correction last Friday.
In a larger context, the decline seen this Friday and the 6/4 decline have some important differences. First and foremost by the close of the market 6/4, the the second choppy decline was already longer than the initial gaping decline. The opposite was true at the close last week Friday. Second, the initial gaping decline 6/4 had a smaller amount of follow-through before the ensuing correction than that of last week Friday's initial decline. Third, the bounce 6/4 retraced about 33% of the initial decline. The initial decline last week Friday was not even retraced by 23.6% (a sharp correction of this magnitude is unusual for a second wave). Fourth and finally, the second decline after the morning bounce 6/4 was sharper than that seen last week Friday.
The differences between the two declines are significant enough to bring doubt to an impulse count lower unfolding since Thursday 7/15. In fact, a wave (iv) zigzag lower since that peak is the count suggested here.
Note also that the last two breakaway gaps seen 6/4/10 and 1/20/10 were both initiations of corrections that were in the context of a larger rally. Using this pattern, the gap last week Friday should also be fully retraced after some follow-through to the downside tomorrow morning.
Readings on the TRIN were very high Friday, rising to around 5 at the close. This is a bullish reading.
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