Saturday, May 3, 2014

5/2/14 Elliott Wave Update

There is no change to the Elliott Wave options in the long term.  In relation to the ending diagonal options, a sideways pattern since (1) remains a lesser option due to the complexity and proportionality of the pattern.
Note that the wave higher from (4) is small in relation to (3) and (1).  This suggests that more development of the wave underway since that time will occur before it is complete, whether or not an ending diagonal or sideways pattern is ongoing.

There are several reasonable options in the chart above.  A flat or other sideways pattern lower since (3) is a good option, except prices have not yet reached the April high.  A test of this level would improve the option substantially.
There can also be a flat lower from the A high.  This option makes a greater deal of sense because A was exceeded by [b] and the [b] wave looks complete.

Why does [b] look complete?  First, it looks corrective.  When looking for impulsive options higher, the sell-off following the Friday high has no good proportionality with any wave within [b] with the exception of a sideways pattern from the 29th-30th.  Because the 30th-2nd rally really cannot be counted as an impulse wave, the most bullish count in the chart above is a flat lower since the 29th.  Second, the structure of the [b] wave higher is complex and already difficult to count as a double zigzag given the lower low made on Friday.  The lower low and overlap that came with it only reduced the amount of possibilities.
If there is a flat lower since the 29th, the structure of it is a very wide and complex pattern making it undesirable.  Therefore the wave count in color is preferred.
Bottom Line:
Last time, it was stated, "at this time, the waves do not suggest an impending correction of anything substantial".  This came to fruition last week.  However now the waves higher since the 28th look corrective.  Since there were 3 waves higher that nearly made a new all-time high above (3), the medium-term remains bullish.  A test of the 1815 level remains possible, but ~1845-1850 should hold prices.  A test of this level is expected before any meaningful rally resumes in the short-term.
The long-term suggests a winding down impulse wave from a late 2011 low, but the intention of the market after this impulse completes remains uncertain.  There can be a zigzag or impulse higher since the 2009 low which have much different implications for the market in the years ahead.  This makes the view neutral in the long-term.

short-term (the week ahead): bearish
medium-term (the weeks/months ahead): bullish
long-term (months to years): bearish
very long-term (years-decade): neutral

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