The market continued higher Friday beyond the important 61.8% retracement level shown above and beyond the 1100 resistance area. This development alone, regardless of wave structure, puts the count illustrated above on shaky ground.
There is a different count that addresses the above concerns while still working in the context of a larger bear market. A wave 2 double with completing triangle [x] is the best possibility if wave 3 is not underway. This view is reached by the logic expressed above. In addition, the fine wave counts (not shown) of all sub waves can be arranged with relative ease to allow for the view.
Interestingly, it happens that the projected upper triangle line is nearly the same trend line drawn above. This line is also the upper channel line that has been drawn in the below chart for some time.
Given the waning breadth and momentum (and volume; but last week did precede a holiday week) of the advance that began last week, it seems probable that this line will stop the current rally, if prices even reach this far. The line will be in the 1115 area Tuesday (the market is closed Monday due to the Labor Day holiday).
Even though the new view addresses important concerns, there is still good reason to believe the current rally is actually wave [ii] of 3. First a very wide, sideways wave 2 is not typical. If the [x] wave triangle idea is correct, it may be a week before it completes with [y] not even beginning. Second, doubles in and of themselves are uncommon patterns. Third, it is unusual for an 'x' wave to be a flat or triangle. In the book, "Elliott Wave Principle: Key to Market Behavior" p. 52, it is stated that "each reactionary wave [in a double], labeled X, can take the shape of any corrective pattern but is most commonly a zigzag". In "CyclePro Elliott Wave Rules and Guidelines", (a copy can be found here) it is actually stated that "wave X may be any corrective pattern except a triangle, double or triple."
Both options have their own distinct disadvantages, however the above short term labellings apply to wave (d) of completing triangle [x] and wave [ii] of 3. The rally still has a corrective feel to it as discussed last week even though the labellings have been changed somewhat since Thursday's update.
If wave [ii] of 3 is actually nearing completion, 1107-1111 should be reached Tuesday before reversal. As mentioned above 1115 will be the next level that stops the rally if the first target range is surpassed. The level reached, especially if it is 1115, and price action this week will help guide the way for future price action.
If there is a gap lower tomorrow under Friday's trading range, look for a completing wave (e) of [x] wave rather than the beginning of [iii] of 3.
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