Monday, March 21, 2011

Monday 3/21/11 Market Update

The view that two downward impulse waves have unfolded since the last recovery high has not changed since Friday's update. There was overlap today with wave [i] above likely ruling out the completing 4th wave option (not totally ruled out however because a 4th wave must only complete outside 1st wave territory and within 3rd wave territory). As a result, the count has changed somewhat, but the downward view has not changed.

There were higher prices today as suggested in Friday's update. Prices should continue higher tomorrow with the 61.8% retracement level likely being exceeded for a short amount of time.

An impulse wave completing since last week's low is a good option, especially since there is a good downward zigzag count since the last recovery high, but the larger view presented in the 60 minute chart above works against this count.

The reasons for the bearish argument are due to features in the larger picture and can be summarized in a few key arguments.

First notice the two fairly clear impulse waves higher since late August. The second was shorter than the first making a 3rd wave in that position somewhat questionable.

Second, and more importantly, the possible correction since the last recovery high retraced the second impulse wave quite deeply. When a larger trend is underway in the same direction, it is unusual for a 3rd wave to be retraced so deeply. One would have expected the fairly low 4th waves of the second impulse to act as support and they did not.

Third, the possible corrective 2nd and 4th waves of an impulse rally since late August do not alternate (they are both sharp) and are not proportional with one another. As this blog has stated on this scale for months now, a single zigzag since late August has been the expected outcome. An impulse since early July 2010 is possible, but there again is lack of proportionality between corrective 2nd and 4th waves not to mention an unusual 3-3-3-3-3 leading diagonal to start the pattern.

Finally, a set of 1-2 waves higher since summer 2010 is a possibility, but the momentum loss puts this count up against considerable technical odds.

All the reasons above and counts previously considered in previous updates create a good argument for the primary count presented today. At the same time, please keep in mind that this blog only provides the best count and nothing else. To enter frequent, high probability trades, an Elliott count should only be used as one piece of the puzzle.

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