Wednesday 12/4/13 Market Update

The primary wave count presented in the last update has been invalidated due to the sell-off this week.  Upon reevaluation of the waves since 2009, the primary wave count has reverted back to one suggested here not long ago.  The size of wave (5) of ending diagonal [C] is my main concern with the option as the all-time high of the wave count is only about 2 or 3 points short of invalidating the pattern ((3) cannot be the shortest wave within [C]).  Now that the short term suggests the wave higher since the October low is complete, the option seems stable.  The primary wave count is preferred over the alternate counts because it fits far better with the waves in late 2011, middle and late 2012, and even the 2009-early 2010 rally.

The best options on the scale above are an ending diagonal higher unfolding since the November low (very complex), a complete ending diagonal since the October low (broken guidelines: no wave crossing and 2nd wave is seldom a sideways pattern but nice wedging), a sideways correction underway since the October high (strange with b/x wave so high; not well proportioned), and a triple zigzag since the October low (the primary wave count, best option on this scale alone).  Because of the longer term waves on the daily chart, there are many options for the degree that any impulse or ending diagonal option since the August or October low belongs.  Ending diagonal patterns typically terminate larger patterns however.

There was almost certainly an impulse lower from the Friday all-time high to the low reached this morning.  Following this appears to be 3 waves higher, 3 waves lower to a new low for the day, then a rally of some sort.  This pattern seems to be a flat and it looks complete due to the size of the selling into the close relative to the other pullbacks of the wave.  If the market rallies tomorrow to give a 3-wave look to the rally following today's low, keep in mind that an impulse wave down from the last all-time high to today's low is possible, but this is a questionable pattern.  A better fit is a complex upward sideways structure underway since today's morning low.