The count presented in Friday's update was followed quite well today. The market rallied to 1246.73 before retreating late in the trading day. From an Elliott perspective, there is good reason to believe the rally since March 2009 is over.
First consider the retracement of today's gap, a move out of proportion with the impulse waves following the wave [iv] triangle above. This move may be part of a second wave, e.g. (ii) of [v], but the impulse labeled above works well as [v] alone considering its proportionality to waves within the larger rally since 11/30. In addition, the complex subdivisions within [v] support this; it is unusual for a 1st wave of this size to resemble the 12/9-12/13 (wave [v]) rally.
Second, triangles are always the final or second to last pattern in a wave. In the case of [iv], there is one impulse wave following the triangle, labeled wave [v]. It is possible this is wave i of (c) of [b] or a of (y) of [b] if the alternate above is correct, however again for proportionality reasons within the rally since 11/30 alone, a complete wave [v] is preferred. Among the options, a single impulse wave C is also the most simple count which improves its chances.
Third, prices broke out of an established set of trend lines during today's late sell-off; see the two charts above. This suggests some new downward wave is underway. Using the arguments above, a wave lower following a complete impulse since 11/30 is the best bet. At best, this is a second wave correction that should retrace at least 38.2% of the impulse rally.
Zooming out again, an impulse since July is a possibility with wave 4 that may or may not be complete (the alternate above). If not complete, a wave 4 triangle is the most bullish option but implies most of the rally since 11/30 will be retraced.
The primary count is the preferred count which carefully utilizes the market structure apparent since March 2009, all the way down to the 1 minute charts. All waves are well proportioned with one another. In addition the alternation between the intermediate degree zigzags are apparent; one impulse shows clear subdivisions, the other does not. In other words the impulses of the zigzags do not resemble each other which is typical.
In summary, there is a good chance the rally since March 2009 is complete without even considering the technical picture of this overbought market. If primary wave [2] (or "equivalent") is complete, a moment of total complacency was reached by society today. This was the topic of an essay I wrote March 14th this year.
Even if the count is incorrect, at least 1210-1220 should be reached in correction as a top draws very near.
If there is a gap down tomorrow, this does not invalidate the larger bearish picture. Above are gaps left unfilled during the 2007-2009 bear market.
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