Wednesday 4/9/14 Market Update

There is still no change to the long-term options.  Wave [4] has been marked complete because of the wave development seen today.

Before stating why the change was made, there are a few good ways to describe the wave higher that began 2/5 which are worth noting.  These are a double zigzag higher still underway (alternate' 2), a zigzag underway (alternate'), a complete zigzag higher (alternate''), and an impulse higher (primary).  The incomplete double zigzag is not preferred because of the complexity.  Better is the single zigzag underway but like the double zigzag, it is already much larger than (A).  (A) and (B) do not look proportional to one another (a problem for weeks now) and this is one of the things we strive for in Elliott Wave analysis.  In relation to the other incomplete corrective options mentioned, a better option due to its simplicity and size is a complete zigzag.

Because the clear corrective option higher in the chart above is a double zigzag and this does not seem to be a great option, alternate'' is looking somewhat doubtful.  If alternate'' is not correct, this means alternate' or alternate' 2 are better options. As discussed, the complexity and size of these options are significant problems.  The primary wave count on the other hand has no problems like this.  Its structure in the sideways congestion period is really no worse than the alternate wave counts, thus this cannot be held against it.  It is uncommon for a 2nd wave to behave as this one did and this is a problem.  But the size of the sideways action is now large enough that is seems like a good-sized base to support a strong move to the 1950 area (where with strength, (3) will be longer than (1), a typical attribute for impulse waves).  Also worth noting is that wave [2] was a sideways pattern (alternates with a sharp wave [4]) and is already in good proportion to [4], so this works well with the primary wave count.

The real reason for the change in primary wave counts is due to the structure of the advance since the Tuesday low.  Price should not advance much farther if this is a second wave underway, but only an atypical double zigzag count seems worth investigating.  Not only is this option complex, but its second zigzag leg is fairly large and looks more like the core of a larger impulse wave underway.  In price rallies, generally a slow arc higher like the one seen since Tuesday is the winding up of an impulse wave.

Friday 4/4/14 Market Update

There is no change to the wave count options in the long-term.  A impulse wave [5] underway since the 2/5/14 low seems difficult to imagine from a momentum perspective during this late stage of an impulse wave that began in 2011.

The action higher following the 2/5 low still resembles a 3-wave advance.  The sell-off following Friday's high was exactly what the wave count has been suggesting would happen with the short-term count proving to be exactly true.  This move improves the probability of the primary wave count of a complete zigzag higher since 2/5 and it will continue to strengthen as prices move lower.  While things are moving as expected, it is important to note that alternate' is still the best alternate count and not a poor option.

The action on Friday was a bit strange, but the wave down can be counted as an impulse wave, barely.  This wave can also be a double zigzag down (which might be used if alternate' is correct).

There was some momentum loss lower late in the day with a relatively large rally following what proved to be the day's low.  This is a signal that the wave down is complete and a corrective rally is beginning.

Wednesday 4/2/14 Market Update

In the long-term, the options remain unchanged from the last update.

The market has broken out to new all-time highs, rather than pulling back at 1885, which is a signal that the long, wide correction lasting weeks has ended.  Because of this development and the complexity required for a correction to still be underway, alternate'' is not a strong option.

The very shallow correction seen since Feburary can be a second wave, but a sideways correction like this is not typical of second waves.  The market will need to put on an amazing show of strength over the next few weeks if a third wave is underway, particularity because the bull market is so mature.

The problems with the alternate counts above make the primary wave count stand out by a good margin.

There are many ways to describe the movement higher since 3/27, but the best symmetry to the move so far is as labeled above.

Note: There is a jobs report at 8:30am EST on Friday.  These create volatility and can be catalysts for large moves.