Friday, July 25, 2014

An Important Day

The action on Friday proved to be important for determining a set of possibilities that suggest where the market is likely heading in the near term.  There is more to say in the shorter-term scales than last time.
But before going into these details, note that the long-term picture remains unchanged.  For a detailed look at the reasoning behind the following summary below, please refer to this update.
"First, a sideways corrective wave lower from 2014 [iii] is a reasonable possibility worth considering when used as a 4th wave that is paired with 2nd wave [2].  But the problem with this sideways correction is that price has rallied so far above [iii] with the ‘b’ wave being quite large relative to ‘a’.  So it has been labeled “weak”, but just barely given that the larger impulse structure it is a part of is not bad.
An impulse higher unfolding since 2014 [iv] is weaker than the sideways pattern due to its complexity and the structural concerns within the larger impulse higher since 2011.  This possibility is on-par with a pullback of similar size of (2) following (5)’s completion, then another impulse higher following; or a 2010-11 triangle with impulse higher completing at (5).
The poorest options involve an additional stretching of the impulse wave higher since 2011 where a 5th wave extension is taking place or the core of the impulse wave is in wave 5 territory.  These are the remaining options discusses above."
It should go without saying that the same options exist for the wave higher since 2009.  Namely a developing zigzag or impulse where the zigzag option has been weakening as price continues higher.

Last time it was reasoned that the downward sideways possibilities since 3 or [b] are weak because of their size and the structure since (4).  The rally that has unfolded from 4 to (5) can now be a zigzag which lets a sideways correction continue and perhaps terminate sooner than expected, but this offers little benefit to these options.  For example the quickest way of terminating an incomplete pattern would be a quick test of the 1950s for a flat down since [b] ([d] is not 5 waves so a correction cannot begin there).  Then the weak impulsive option in the chart above must be used.  A correction since [b] is then large relative to all other corrections since (4) and of course there are all the structural problems with this option; e.g. using [b] as a 5-wave move and [ii] to 3 as a 5-wave move.  These structural problems are eliminated if a sideways pattern is underway since 3, but then this pattern is clearly huge relative to any consolidation period since (4).
With a correction very likely ending at 4 and the structure likely unfolding as drawn above (the other option worth noting for action following (4) is the impulsive one in text in the chart above, but this is very weak), the most important thing to pay attention to is the action following 4.

For my short-term analysis, my view of where the market is going, and the consensus of a team of analysts, please visit  There is also a free week if you are uncertain of the value in joining.

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