Saturday, August 3, 2013

Friday 8/2/13 Market Update

Although the "or" wave count in the last update is not entirely correct, 4 does look complete as the count suggests.

The core of 5 is very likely Thursday.  With symmetry in mind, 5 should complete after another week or two of rallying.

The momentum of the rally that began in June is clearly waning which works well with structure of (5) shown.  The alternates on the chart above continue to be weak options because of their complexity and what would be the resulting size of (4).

(5) and [C] look similar; the current levels have little separation from the highs of 3 and (3), respectively.  It is very likely that wave 3 and (3) territory will be reached again soon.

There should be a sell-off coming that can be alternate wave [4] or something much more dramatic.  A technical argument for a significant top is the divergence in the advance-decline line that has occurred.  While only minor between the May and August highs, it is there and it has not been seen for the entire rally since 2009.  The divergence between wave 3 and the current level is more major so it seems unlikely that divergence will not occur between (3) and (5), assuming the count for 5 is correct.

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