Wednesday, July 23, 2014

Trend is Intact, but for How Long?

The action since the last update does not change the long-term possibilities.  In this update the options for wave counts higher beginning at [2] were discussed in great detail.  A sideways corrective wave lower from 2014 [iii] is the next best possibility after the one above in color, but its 'b' wave is very large relative to 'a'.  An impulse higher unfolding since 2014 [iv] is weaker than the sideways pattern and the options involving 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 trail the field.
Since the 2009 low, a zigzag wave higher is possible, but this is growing weaker as price continues higher.  It will also not be until the 1500s are breached that there can be an improved chance given to this option.

In the medium-term, an impulse higher developing since (4) is still by far the most probable option.  The advance to a new all-time high this week brings to mind the possibility of an additional test of the 1940s/50s support, but this fits poorly into the larger picture.  Given that there essentially cannot be an impulse higher from [iv] to [b] (looking for an impulse from 2 to [b] so wave 2 can be paired with a 4th wave underway since [b]), allowing an "extra" 5th wave in the [b] position does not fit into the larger count ([b] looks very much like a 3-wave pattern), and the sideways consolidation period since 3 is already large in relation to the previous corrective corrective periods before it, the chances of a re-test of the 1940s or 1950s before the market continues higher is poor.
An additional reason why [v] and [b] are likely not 5th waves can be explained as follows.  Unless (a) to (c) of [ii] is a 1st and 2nd wave, or 2 to [b] is an impulse wave (following the weak impulse option above) the possibility makes no sense.  The former is very unlikely due to the structure of (a) to [ii] that nearly fully retraced (b), and if this is correct, the size of [b] to 4 is already larger than all corrections higher since (4).  The latter faces a similar problem where a correction beginning at [b] would likely grow to a size larger than [i] to [ii] when complete (but it already makes [a] and 2 look small), but remember also the structure of [ii] to 3 is very hard to imagine as an impulse wave.

To help solidify the view that there is not a corrective wave higher since [e], consider the chart above.  It is a struggle to imagine either a 3- or 5-wave pattern complete since [ii] or a single, double, or even triple zigzag complete since [e].  An ending diagonal underway since [ii] with '1' to (i), '2' to 1981, '3' to i, '4' to ii, and '5' underway is possible, but this would be an unusual pattern with (i) so impulsive-looking and large relative to the other motive legs.  Maybe there is a zigzag developing since [ii], but wave [i] strongly resembles an impulse where its corrective legs are smaller than some of those contained in post-[ii] waves.
The wave action higher since [ii] looks most like an impulse wave to (i) with at least one additional 1st wave following (like the wave count in color above), or a sideways corrective wave underway since (i).  Both possibilities share similar probabilities with perhaps the option for a corrective wave underway since (i) taking a slight edge.  Note that a structure like the one above in color does not suggest a 4th wave to be paired with [ii] is underway since (i), although it is possible weakly.  A 4th wave underway since (i) would likely look better in relation to [ii], but remember that wave (i) is shorter than [i] and it is typical for 3rd waves to be larger than 1st waves.

My final analysis and more from our other analysts is available at  Our free week has returned!

Here is an additional thought of mine from Elliott Wave Analytics:
Yesterday Elliott Wave International put up a publicly accessible chart on their Facebook page expressing their view of short-term action while pushing their new U.S. Intraday Stocks Pro Service":  This is the chart below:

While their call for a bottom at c is in line with action that followed, a few things struck me. First, wave 4 terminates in wave 1 territory which is a violation of the rules, therefore there cannot be an impulse down since b as described.  And if there is no impulse wave c, then the flat pattern they are suggesting is also not valid.
Second, even if there is a flat like they suggest (from [b] in my charts) there are the major structural problems that I highlighted and discussed deeply above; namely all the problems that go along with either [v] and [b] needing to each be 5th waves, or [iv] to [b] an impulse wave.  Actually this gives them the benefit of the doubt.  I suppose they could have a flat from 3 to [c] for wave a which would be much crazier.
The observations this "pro" service arrives at are quite disappointing.  End of the day, I am proud to put my name on my work because of the amount of thought I put into it.  This is behind the quality and high degree of predictability relative to other services that I and the others on this site strive for.  Thank you for being a member.

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