5/14/14 Elliott Wave Update

We begin today's update by pointing out the wave count possibilities that exist on large to narrow scales.  Since the 2009 low, as has been discussed, there can be a zigzag or impulse higher developing.  The strongest option for the zigzag option is counted above in color.  It can also still be underway where the last impulse leg of the zigzag starts at [C] in 2011.  Turning [D] and [E] into a 1st and 2nd wave must be forced however and is not a great option.  Wave counts since the b low for impulses not essentially complete have low probabilities, regardless of how they are counted.

If an impulse beginning at the 2009 low is still underway, an impulse higher since [C] in 2011 will be the correct choice.  While an impulse higher from this point can be essentially complete, it is a weak wave count (it uses the impulse option from [E] to A in 2013).  Stronger is an impulse still mature, but using an ending diagonal higher underway since (2) in 2013 or a sideways correction beginning at (1) in 2013.

An impulse higher since [4] is a possibility, but either the core of this wave still lies ahead or there is an out-of proportion sequence of waves higher unfolding.  Because both of these are low probability events, this count is very unlikely.

Inspecting the last 2 years for a moment, we find that there can be a sideways correction since the (1) high developing or an ending diagonal beginning at [4], B in 2013, or (2).  These are all reasonable options worth considering.

How do the last 5-6 years fit into the larger picture?  First, there is a good probability that [III] marked a 3rd wave that is complete, rather than an impulse that is still underway since the [II] low.  If [III] is then a major top, something sideways likely did unfold or is unfolding.  There is decent proportionality between [II] and [III] to (a/w), so an impulse wave [V] can be underway.  There are concerns about the very high market cap to GDP ratio and pop-culture sentiment at this time however; these indicators do not seem to form particularity fertile grounds for a rally continuing for years to decades without a significant pullback first.  Maybe there is an impulse higher since (a/w) forming that is winding down as the first wave of a larger impulse.  There can also be another test of the 2002/2009 support level.  These impulsive and corrective options are both very good and suggest that the 2002/2009 support level will hold.

There is a very clear-looking 3 waves higher since the wave (4) low that jumps off of the chart above.  Obviously there can be a sideways correction underway since (3), however keep in mind that this is only applicable if something sideways is unfolding since the early-2014 wave (1) high.  This would be a very complex pattern but the proportionality of its waves is reasonable.

On a similar note, a double zigzag can be underway since (4) where the first zigzag completed at (5).  This would fit into a sideways pattern since (1) or an ending diagonal leg higher from (4), but this is adding a layer of unnecessary complexity to the picture.  The markets' moves tend towards simplicity.  Important to note here is that an ending diagonal higher since (2) in 2014 is possible and worth considering, but then a greater height above the (3) high is preferred.  This double zigzag option would resolve this height issue, but again of course at the sacrifice of simplicity.

Something sideways and still underway beginning at A in April is also possible, but it would require some strange looking waves that do not count naturally.  The structure seems to require a flat lower since [b] marked above with the horizontal line.

An impulse higher since B where its core is still ahead is possible, but is not likely or worth noting due to the wave structure higher since [c] ([d] and [e] essentially must be a 3-wave moves).

A far better approach to the above picture is to take the three waves higher since (4) and count them as they first appear, a zigzag with triangle B wave which is in color above.

Finally, before the final analysis, the short-term waves since C show 5 waves lower.  This move in and of itself can be an impulse, but is more likely a set of 1-2 waves developing into a larger impulsive move lower due to the balance of the pattern so far.

The final review of the market can be found at http://www.ewaveanalytics.com.

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