5/9/14 Elliott Wave Update

The structure higher since 2009 works best as a nearly complete zigzag higher or a developing impulse wave.  The pros and cons of these options were discussed in the first part of an earlier update in April here.

Regardless of which longer-term wave count is correct, we are almost certainly watching an impulse wave higher that began in 2010 or 2011 wind down.  An ending diagonal higher since the 2013 low of [4] or B is the strongest option.  Weaker due to the subwave proportionality is a sideways correction underway since (1).  Something impulsive higher since [4] or B is a weak option due to the lack of strength and subdivision the market has shown; this would be a complex impulse wave and as the next chart shows, the subwave structure makes it questionable.

If the market is still drawing out impulse waves higher (e.g. an impulse wave higher since [4]), as explained in earlier updates, there must have been a sideways pattern from A to (4).  This is a weak option as many parts of its structure are real stretches of the imagination (e.g. an ending diagonal from (3) to (4) is required).

The best possibility above is a sideways pattern unfolding or complete since A.  A complete triangle looks best because of the complex set of zigzag waves chopping in a tight and contracting range.  The triangle does not have great symmetry, but this option is preferred a bit over an ongoing sideways correction.

The chart above shows in more detail just how complex (and perhaps boring) the action has been over the last few weeks.  Look at all of the zigzags and double zigzags in this tight range!  It has been the choppy 3-wave moves lower followed by the 3-wave rallies nearly retracing all the preceding swings that make the action look so bullish.

If the triangle option is correct, wave [e] may not be complete.  There can be a sideways correction in [e] forming (or another wave within a sideways pattern underway), but this is a low probability possibility.

Additional:

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5/7/14 Elliott Wave Update

Last time it was stated, "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."  The same remains true today.  Obviously a new all-time high is required if one of the ending diagonal options is correct.

There are still several good options to explain the rally higher since the March 2009 low.  It remains to be seen whether this is a multi-year zigzag correction or an impulse higher.

The possible flat lower since (3) has been removed as an option.  The reason is that the last all-time high was never reached and the [b] wave can now essentially only be counted as a double zigzag.  A flat options from A in February to (4) remains weak.

The best options in the chart above are a sideways pattern since A in April (with a triple zigzag underway since [b]) and a triangle which the count in color represents (the upper dotted blue line is the symmetric line where [d] is projected to terminate).  Both of these options obviously suggest that a correction since A is incomplete.  If prices continue to move higher from today's low, a diagonal since the (4) or [a] low is most likely underway.  But a sideways correction is a stronger option.

There is clearly a corrective structure lower since [b] and this is a bullish feature.  The very corrective looking rally higher from today's low is an indication that a larger corrective pattern is not yet complete however.  Triple zigzags are rare, but a zigzag move down to 1850 following at most a very minor rally tomorrow morning would be a well-proportioned triple zigzag move.  If 1881 is broken to the upside, the triangle count will remain a strong option.  The diagonal choices from the (4) or [a] lows will not gain much of an advantage until 1886 is exceeded.  Even then it will not be certain whether or not a sideways pattern is still underway since the April A high until the size in price of [b] is exceeded by the move.

Bottom Line:

Last time the short-term summery was marked at "bearish".  Price did retreat.  It was also stated that, "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."  Due to the zigzag action lower since [b], it is now unlikely that ~1845-1850 will not support prices before a new all-time high.  This appears to be a very good buying level for a trade with limited risk, if prices reach that low.

While things look bullish in the medium-term, a consolidation period looks incomplete in the short-term.  If prices continue higher since [c] without making a lower low and exceed 1886, things will look more bullish, but this scenario is not that likely.

short-term (hours to days): sideways

medium-term (weeks to months): very bullish

long-term (months to years): bearish

very long-term (years-decade): neutral

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