Saturday, November 30, 2013

Friday 11/29/13 Market Update

Due to the near 1815 level reached Friday (the level where the primary wave count in the last update is invalidated because a 3rd wave can never be the shortest wave) and the structure of the waves since the October low, the primary wave count in the last update has been taken away as a potential option.

In the chart above, the core of an impulse wave taking at least several years to unfold appears to have been seen early this year.  6/4/12-8/2/13 looks like an impulse wave.  8/2/13-8/30 is almost certainly a 4th wave (not 8/2/13-10/9 which is very unlikely due to structural reasons).  These are the obvious observations but beyond this, there are a variety of options with varying levels of probability that should be considered.

The alternate wave count is suggesting an impulse wave higher underway since the 2009 low.  This is not preferred because of the late 2011 structure and the lack of proportionality between the 1929-1930s decline and 1999/2000-2009 sideways correction.  But if this wave count is correct, there can be an incomplete impulse wave higher since 8/30/13 or 10/9/13.

If there was a triangle that completed in late 2011 as the primary wave count suggests, there must be an impulse wave higher underway since the 8/30/13 low.  Then there is a proportionality problem within the subwaves of [5] above.  If this is to be avoided, the alternate wave count (and alternate' wave count) is in play with the 8/30/13-9/19 impulse being a 5th wave and 11/28/11-5/1/12 impulse a 1st wave.  This 5th wave is then very small relative to 1st and 3rd waves so there is also a proportionality problem.  Thus an impulse wave higher since 8/20/12 as the primary wave count suggests is not a bad option.

Also note that the alternate' wave count, a variation of the primary wave count on a large scale where the 2010-2011 triangle is basically replaced a running flat, also brings an incomplete impulse wave higher since the 10/9/13 low into the realm of possibilities.

If the 10/9/13 low, rather than the 8/30/13 low, is to be used as the beginning of an incomplete impulse wave (only possible if the alternate wave count or alternate' wave count is correct), it is hard to find a viable impulse option.  The Alt': Alt option is showing the best possibility.  This option has a proportionality problem and a surprising lack of size to its 3rd wave.  The core of this wave higher since 10/9/13 may still be coming, but the momentum loss and size of the incomplete impulse suggests a mature wave, not a wave still in the early stages of development.  This is particularity true given the longer term picture in the first chart: an impulse that began a few years ago appears to be winding down, not breaking new momentum barriers.

The important thing to note is that regardless of what the structure higher is since 10/9/13, an incomplete impulse will have a proportionality problem.  A complete ending diagonal higher in this position is possible, but then there are several problems: there is no crossing between 1st and 4th waves (a broken guideline), the 2nd wave is a flat (a broken guideline), and the 1st wave is considerably larger than 3rd and 5th waves.  If it is incomplete, the (complete) 3rd wave becomes a better size, but the second wave is still a sideways pattern and wave crossing occurring in the future is very unlikely.  So regardless of what an ending diagonal since 10/9/13 would look like, it has considerable problems.  On the other hand if the primary wave count is correct, there are no problems within the wave higher since 10/20/13.

The primary wave count suggests an ending diagonal unfolding since the 11/7/13 low for an impulse higher since 8/30/13 underway.  This ending diagonal accounts for action nicely with no broken guidelines like the options discussed above.  Ending diagonal patterns are usually not seen unless they are terminating a wave of significant fractal degree.  For example an ending diagonal found in an impulse wave is usually the last 5th wave in a series of 5th waves within an impulse.  This checks out as well given the longer term wave options.

To summarize the above, the primary wave count has the fewest problems where a problem is something that does not follow the usual Elliott wave guidelines used here where proportionality and symmetry are emphasized.

In the short term, a sideways correction underway since the 11/25/13 high is possible (required by the Alt': alt wave count) but the primary wave count is suggesting an incomplete zigzag wave 4 of ending diagonal (5) pullback which began at the Friday high.  This wave should cross into wave 1 territory, then the market should advance again in another zigzag pattern to terminate the ending diagonal wave (5) pattern,

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