Wednesday, April 16, 2014

Wednesday 4/16/14 Elliott Wave Update

Last time, there was the following statement: "the expectation is for a bounce to 1835-40 whether or not prices retreat to just under the Friday low first...If prices move directly to 1835, that would be a signal for lower prices to come as an upward sideways correction would look probable".  Prices did advance to 1835 and this move in hindsight is very likely part of a sideways correction; while there was never a break of Friday's support, a test of the Friday low followed, missing a new low by only about 1 point.  How this and the additional rally and support test fit into the larger picture will be discussed momentarily.

A different look at the long-term picture than illustrated last time is above.  All the same options still exist but some of the colored and horizontal line possibilities have been reversed (remember that there are no primary/alternate wave counts used at this website, there are only options listed; these are then used to form a view that is a probability distribution).
Notice how the triangle [D] and [E] waves work better with the structure.  There is a lot to be said for a zigzag structure in wave (1) of [5] instead of an impulse.  On the other hand, ending diagonals are fairly rare patterns.

The congestion area at the 1815 support area is interesting because of what it means to the larger picture: for the reasons below, it strongly suggests the wave in the (3) position is a zigzag with corrective waves following.
There cannot be a complete zigzag down from the last all-time high which makes a flat+zigzag double since the A high unlikely.  While there can be a flat higher since W to make the 'b' wave of the zigzag in this double, this puts the zigzag fairly out of proportion with the flat.
When considering a flat higher since W, it fits as a 'b' wave or a 2nd wave if the market is still completing a wave lower since the last all-time high.  This flat possibility is preferred over a correction self-contained since the Y low because of its balance and proportionality.  It also has the consequence of being most simplistic among the short-term bearish options.
Besides the weak double option mentioned above, there seems to be only one other way of keeping the impulsive option alive since the low at wave (2).  This is a flat since the A high where there is an ending diagonal lower following the wave (3) high.  The flat has many structural problems throughout with the wave XX flat being one; it is extremely rare for the corrective waves in ending diagonals to not be zigzag-family patterns.
A sideways correction underway since (1) is still a possibility.  The two best ways to work in the waves since (3) in this regard is through the upward 'b' or '2' flat discussed option above or 'x' wave flat or double since the Y low.

The rally from the (4) low can be a complete 5-wave pattern, but then it must be an ending or leading diagonal.  A pullback beginning on Thursday can also be 'c' wave of a flat.  This rally can continue higher before stopping, but the structure and momentum suggest a pullback is coming rather than an impulse wave still unfolding.
To summarize, the ending diagonal option since the wave [4] low looks great, assuming the low reached this week holds.  The other few other ending diagonal options also find importance at this level.  If that level breaks, the waves ensuing after the wave higher in the (3) position, which is very likely a zigzag, can draw out a variety of patterns.  Action like this to the downside is suggestive supports a sideways correction underway since the January 2014 high which still has a good probability, but it of course weakens as prices move higher.  The long-term count since the 2009 low is still irrelevant from a trading perspective as all options suggest another new all-time in the near future.

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