The Trend Continues

The market continued higher the last few days, but this does not change the wave count options expressed last time.  The best options are ending diagonal wave counts beginning in 2013 at [4] or B where their 5th waves are underway, or an ending diagonal underway since (2) where its 3rd wave is underway.  An impulse wave higher since [4] and/or (2) are very weak options.

Somewhat better is one of the sideways options starting at (1) or (3), but these are both adding a large new degree of complexity and size that does not work well in the the larger context.  For example a sideways wave underway since (3) is just expanding the size of a double zigzag higher since (2) which will lead to problems.  When the 'c' wave of the sideways correction comes, wedging has a good chance of being lost when considering that at least B will be reached.  This will invalidate all existing ending diagonal possibilities.  A large sideways wave since (1) or ending diagonal beginning at (2) with its 1st wave underway would become the best options, but the complexity of these patterns is certainly unusual.

A simpler sideways pattern since (1) is better with its 'b' nearly complete, but the size of 'b' is quite large in relation to 'a' and the whole pattern's pairing with either [D]-[E], B of (1), etc. also makes it questionable.  The 2nd and 4th waves of an impulse are typically of similar size and the corrections of the subwaves of impulses are usually of smaller size than the parent wave's corrective waves.  Also remember that an ending diagonal's 2nd and 4th waves are almost never sideways patterns so a sideways wave since (1) is probably a corrective wave within an impulse.

There are two good options following the wave (4) low; a single zigzag where an impulse wave higher needs to complete beginning at X or a double zigzag illustrated above with the colored labelings.  As discussed last time, the problem with the single zigzag is the structure of [a] of W to [w]; in order to find a corrective wave from [a] to X (clearly the most natural way of looking at the waves because of the large advance above (b) of [y]), a single zigzag must be forced from [a] to [w].  Remember a double zigzag higher from [w] to (b) for a 'b' wave of a flat is possible and this allows a triple zigzag from [a] to [w], a good way of describing that region, but this double zigzag is a poor option because of its subwave structure.

The double zigzag option higher in color resolves the subwave problem except [c] of W looks quite small in relation to [a].  But [b] of Y from a few weeks ago has good proportionality with [b] of W which makes this wave count a good one.  Relative to the other possibilities, in its entirety it is no worse.

A sideways correction still underway since (b) of [y] is possible, but the rise well above (b) gives it a low probability of occurring.

In the short-term, the core of the impulse wave higher since [b] is very likely on the 27th.  As it stands now, there is a nice shape to the wave with the core acting as a symmetrical point as it usually does.  Wave v of (iii) is a bit small in relation to i of (iii), but wave iv is much larger than any corrective within iii.  This attribute gives the strongest wave count as shown above in color but because of the better symmetry that it brings, it is the next best option.  In addition, the large subdivision we are seeing since (iv) (corrective waves as large as anything since [b]) is most typical of the terminating 5th waves of impulses, not 5th of 3rd waves of impulses.  If there is an impulse wave from ii to (iii), then there also must be an impulse wave from (ii) to iii of (v) or what will be v of (v) (wave i of (iii) really cannot be broken down into separate 1st and 2nd waves because of the small size of the waves within it).  An impulse to iii requires a very wide corrective wave from (iii) to ii which is large in relation to ii of (iii).  So that option makes little sense.  Better is an impulse to what will be v of (v), but as mentioned a 5th of 3rd wave with subdivision like this not typical.

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Holding Above 1900: Is 2000 Next?

The long-term waves since the 2009 low suggest a zigzag or impulse higher is developing.  There are various ways to describe the 2010-2011 congestion area following wave a, but a triangle works very well with the structure of waves [D] and [E].  Obviously this would imply that there is a zigzag since 2009.  A flat following wave a or a 1st and 2nd wave since [A] of b are still good options worth considering however and the structure of last 100 years works well with an impulsive rally.  It will not be better know which is correct until a sell-off begins and its size can be compared to the previous ones in the post-2009 rally.  For example a dip to the lower 1500s is a signal that there has been a zigzag higher beginning at the 2009 low.  A brief explanation of how this multi-year rally fits into the larger picture is available here just under the multi-decade chart.

In the shorter term, a sideways pattern since wave (1) in 2014 looks fairly weak now due to the massive size of the rally since (2) in relation to wave (1).  Due to this and the very low probability of an impulsive pattern developing since (2), a sideways pattern from (3) looks weak as well.  These sideways options are only adding more complexity to the picture.

If the market is impulsing higher following (4), on a weekly basis the market needs to maintain momentum higher and preferably get to a level where the wave following B is larger than A.  Because this is such a weak chance of an impulse higher since (2) developing, the possibility of an impulse higher developing since (4) should also not be taken seriously.  So far, the rally higher since (4) strongly resembles a 3-wave pattern anyways.

Wave [w] of B has clear structural problems; waves ii and iv are of much different size.  Good proportionality can be restored to [w] if ii is taken as the top of a single zigzag that began at (4) so there is wave 'a' to A and wave 'c' to ii.  This in turn brings a great lack of proportionality to the impulse legs of a zigzag terminating at ii, but ii did massively retrace i which gives the possibility merit.

The point of discussing the subtleties of wave [w] is due to the structure higher following B.  This wave, if it completes when an impulse higher following last week's low terminates, works as a zigzag that pairs well with a zigzag to the wave ii high.  In other words, there can be a complete or nearly complete double zigzag higher which began at wave (4).

A single zigzag 'w' to the wave (b) of [y] high followed by part of all of an 'x' wave is still a possibility, but a weak one due to the complexity.

The best option since [ii] is the one depicted in color up to the wave (iii) high.  There can still be a 5-wave advance unfolding since (iv) or an ending diagonal can simply be complete since that time.

The core of an impulse higher since [ii] appears to have been on the 27th and usually this comes at the middle of an impulse wave.  It is far from the middle of the impulse in the wave count above, but it is difficult to view the structure continuing much higher.  The central reason why is the fact that wave iv is large in relation to the corrective waves within iii.

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A New Round of Buying

The wave higher that we have been tracking since the 2009 low can be an impulse or zigzag wave.  Beginning at one of the late 2011 lows, an impulse wave higher began and is currently winding down.  An ending diagonal higher that began in 2013 or 2014 at [4], B, or (2) remain good possibilities.  A sideways wave since (1) in 2014 is also still worth considering.

Action higher this year is very choppy and full of zigzags, so it is unlikely that the market is drawing out an impulse wave higher since (2) or [4].  A sideways wave from (3) is possible, but it is then an 'x' wave of a double zigzag since (2).  This is a then a very complex move that has either a proportionality problem with the larger structure (if there is a sideways wave since (1)) or will cause loss of wedging higher and loss of ending diagonal possibilities (The lower red line is very close to current action and it almost certainly will be breached if there is a sideways wave since (3).  In addition, sideways 2nd and 4th waves of ending diagonal are extremely rare).

The low-probability burst higher to a near all-time high causes a significant change to the possibilities by moving options that were previously not strong to the forefront.  While an incomplete sideways wave since A remains weak, a complete zigzag+flat corrective wave in the B position is now a good option.  One reason for this is due to the fact that a zigzag from (4) to (b) of [y] now requires a more complex double zigzag higher beginning at (4).  Still, the superior alignment of the structure of the waves with this wave count for a zigzag higher from (4) to (b) keeps it in good standing.  A double zigzag from (4) works much better with a sideways wave since the last all-time high at (b) for 'x' (so 'x' is of better size relative to triangle 'b' of 'w'), so a retracement back to the 1860s, maybe a bit more, is worth considering.

(c) of [y] can be seen as a double zigzag, albeit not a great one.  There are no problems with a complete zigzag higher from B.  Actually it counts slightly better this way because of the deep retracement last week before the surge back to 1900.  Subdivision is a feature that only adds complexity to an impulse wave and one retracing more than about 61.8% is not that common in second waves.

The structure of the advance since B looks best as described above.  If the market begins correcting Tuesday when the market opens (there is the Memorial Day holiday on Monday), getting under 1892, a 4th wave of [iii] very near the core of [iii] and a support area, would be uncharacteristic of a 4th wave.  Since [ii] is so large, in order for [iv] to gain good proportionality with [ii] while obeying typical guidelines, the market will probably trade in a sideways range for a few days.

Conclusion:

In the short-term, a breakdown into the 1880s under [4] is a signal that ...

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