Wednesday, July 2, 2014

Up, Up, Up, ...

The market blew through the 1975.65 level yesterday which invalidated the ending diagonal possibilities originating from the 2013 wave 4 and [ii] lows.  The ending diagonal beginning at the 2014 wave [iv] low is incredibly weak due to the fact that wave (5) is longer than wave [v] and wedging will probably be lost with overlap into wave (4) territory.  The elimination of the ending diagonal possibilities does not mean a zigzag higher is not underway since the 2009 low; a zigzag can still be underway.  This is accomplished through wave 'a' to i, wave 'b' to [2] or (2) (flat or triangle, respectively), and wave 'c' underway.  Flat wave 'b' is strongest due to the lack of symmetry found in any impulse wave higher since wave (2) that has not yet completed.
There are a variety of impulsive options throughout wave [3].  Only the wave count in color stands out from the pack because as discussed in prior writings, the remainder have a bad structural component that the count in color does not have (primarily an impulse wave with poor structure, mainly in the wave 5 area), and/or there is a symmetry problem (stretched 5th wave after 2014 [iv]) that the count in color does not have.  Still, it is important to watch for several patterns, ordered by importance.  First, a sideways corrective wave lower from 2014 [iii] where 'b', underway since [iv], is either a single or double zigzag.  Second, an impulse wave higher since 2014 [iv].  Third, a creative use of the waves higher since 2013 [iv] for one or more 5th waves that follow the structure of the remaining weak impulsive options.

In the medium-term, there can be a zigzag family-wave or impulse higher unfolding.  The impulsive option in color above does not have the best proportionality between [ii] and [iv], 2, or 4 because of how large [ii] is (we care about 2 and 4 in relation to [ii] because subwave corrections are usually not larger than their parent wave's corrections).  A way around this is to view the action after [iii] as an incomplete corrective 4th wave and 1 to [ii] a 2nd wave.  This structure is no worse than the wave count in color, but the higher highs and pulling away from the prior impulse wave [iii] high is a signal that the market has moved on and is not still drawing out a correction.  Still, this is not a weak option and should be considered.
A sideways correction underway since 3 is also a possibility, although somewhat weaker than the one discussed that is underway since [iii].  It almost adds a new layer of confusion as wave 4 would then be larger than wave [iv] and 2.
A zigzag wave higher since (4) would makes it possible for a double zigzag to be underway beginning at the 2014 wave [iv] low, a better option than a zigzag since [iv].  This is because wave (4) is then not used as a flat which is not the best use of the waves as discussed here before.  But keep in mind that the possibility for a sideways correction underway since 2014 [iii] is weak due to the major height above [iii] and the inability to fit the pattern into the larger context without some poor use of the waves that the wave count in color does not do.
If there is a zigzag underway since (4), it is far best having its wave 'a' to 1, 'b' to [ii], and an ending diagonal wave 'c' underway since [ii].  The trouble with turning the subwaves of [v] into 3 waves is the poor proportionality that must be introduced into a wave the counts naturally as an impulse.  Wave [iii] is also better an an impulse wave, not a corrective wave.

The short-term suggests any wave, impulse or corrective, is incomplete since 4.  There are 5 wave higher, but (i) is shorter than wave (iii) and 4 to (iii) of [i] or 4 to [i] of (v).  A triple zigzag is possible, but it is rare in occurrence, (i) works most naturally as an impulse rather than a zigzag then sideways pattern to (ii), and the corrective waves within (iii) are small in relation to those within wave [i] and (i) (when searching for comparable 'b' waves within the three zigzag legs).  The action following (iii) is now wide, but within it, the waves do not have an impulsive look; there are 3 waves down into today's AM low, then a choppy, indecisive period.

More at

Due to the 1/2 trading day Thursday and market closure on Friday, the next wave update will be Wednesday 7/9.

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