A Stall with Bearish Potential

Last time the long-term options were discussed in great detail.  Because nothing this week has caused a change to these possibilities, please refer to the last post for a full explanation of the long-term situation.  To summarize, an impulse higher unfolding since the wave (4) low is a weak option at best due to the structure required before (4).  A sideways pattern since wave (1) is not a poor option and is growing in probability.  If correct, it is most likely a 4th wave where [C] in 2011 is a 2nd wave.  A sideways structure underway since (3) is unlikely.  Finally an ending diagonal higher since the [4], B, or (2) lows remain the best possibilities but the one beginning at the wave (2) low is the weakest choice among these.

1975.65 is an important level and is near current action.  If it is taken out, wave (3) is then shorter than the wave higher from (4) which invalidates the only non-weak possibilities that currently exist, namely the ending diagonal possibilities as marked here.  The wave count possibilities since (4) and later seem to confirm that this level will not be reached for some time.

Two double zigzag possibilities remain; zigzag 'w' to ii of (a) of [w] or zigzag 'w' to (b) of [y].  Both suggest another zigzag is underway or complete that began at the wave B low.  If 'w' to (b) of [y] is accurate, the market is weeks away from completing 'y' because 'b' should be proportional to 'b' of 'w'.  If there is a zigzag 'w' to ii of (a) of [w], the wave higher since B can be complete or nearly complete.  This is a better option because proportionality between 'w' and 'y' is better and a single zigzag down from ii to [w] works well with the small sub-waves.  It comes at the cost of greater complexity like all double zigzags vs single zigzags however and there is then a very small 'c' of 'w' wave that is truncated, an unusual development.

Because of the problems with these double zigzag options, they are labelled "weak".  A single zigzag from (4) counts far more naturally and is simple.

Notice also the impulsive possibilities beginning at the wave B low.  The sell-off from the C high is only well-proportioned to the wave [ii] and wave [iv] corrections.  If there is an impulse higher from [ii], [iii] is the 1st wave and [v] is the 3rd wave.  The 3rd wave is much shorter than the 1st and the core of the 3rd is nearly totally retraced.  These are unusual qualities.  The core of [v] can be moved lower, but there are then proportionality problems with the corrective waves nearest the end of the move.

[ii] to [v] can be an impulse wave where its 3rd wave terminated at the high just after [iii] and its 4th wave terminated at the low just before [iv] which brings moderate proportionality relative to the 2nd wave ((ii) of [iii]).  But there is again the same structural problem as mentioned above when moving the core of [v] lower.

It is more visible above what the problem is when trying to label an impulse higher from b of (x).  Within it, an impulse higher from (ii) seems to be the best attempt in doing so but the size of its corrections are distant from one another.

There is a choppy set of waves down following the all-time high.  If this is happening following a significant bottom at [iv], the pattern would be more bullish. Given what we know about the action higher following B, an impulsive structure down is workable here.  Structurally it labels as well as a double zigzag although the sideways upward 2nd wave corrections it uses are unusual.  Sharp 2nd waves are more typical in impulse waves.

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To the Moon!

The discussion of the longer term options, in 600+ words, is omitted here but can be found at http://ewaveanalytics.com.  The final analysis usually not available on this blog has been provided however.  Also find the viewpoints of two other analysts and a consensus view while enjoying a 1-week free trial.  You can cancel your subscription at any time.

The wave higher beginning at (4) is growing in size where the wave higher following B is pulling away and larger than A.  Going back to the impulsive option since (4), although the size of C in relation to A is meaningful, keep in mind that a 2nd wave from A to B as the sideways zigzag+flat pattern illustrates above is not unusual, but not the most typical.

The double zigzag possibilities since (4) are not strong options because of the complexity that they command.  The double zigzag underway where 'w' is to (b) of [y] of B becomes weak from not strong due to its size requirements and the fact that a sideways pattern since (3) is really the only place it can fit; a double zigzag from (2) is no longer possible and 1975.65 would likely be taken out invalidating the ending diagonal option since (2).  The other double zigzag possibility is weak when considering the complexity and the fact that the subdivision within C is as large as that of 'b' of 'w'.  It also does not fit well into the smaller waves that follow B.

The pause that occurred early this week and ensuing rally works naturally into an impulsive structure.  Last time using the price action from B, it was found that the 3rd wave of an advance that began at B very likely terminated at [iii] or b of (w).  Using this we can say that the 4th wave terminated at [iv] or b of (x).  The double flat structure as illustrated above is more complex than a single flat to b of (x), but it makes [iv] of best size in relation to [ii].  It also has the advantage of giving a more simplified structure of the impulse rally following where no waves are required to be subdividing and there are likely not going to be any subdivided waves.  An impulse beginning at b of (x) on the other hand must have at least one subdividing wave and the corrective wave (y) is a bit large in relation to (ii).  But it does allow (i) to be a 3rd wave which is the most typical position because it is the largest wave.  If this is the correct wave count, there is likely a 5th wave underway since (ii) that is an extended wave.  Obviously if an impulse higher from [iv] is the true wave count, the somewhat preferred option, wave (iii) must remain longer than (v) so it does not become the shortest wave.

Final analysis:

The discussion above leads us to conclude that the market is winding down waves on a variety of scales.  An impulse wave higher from B is likely nearing completion where we are only waiting for [v] to continue winding down.  On Wednesday it was correctly stated, "there can even be a pop higher where an impulse from today's low has not yet shown its core.  But Regardless of what happens, it is likely that the 4th wave of an impulse higher from B is underway or complete where [iii] or the 6/2 high marked the termination of the 3rd wave.".  Trading-wise, it was mentioned that there is "a speculative short-and-hold play for some with a risk appetite.  But it is important to recognize that the short-term is uncertain".  The same remains true now, but there is less risk attached to the trade.  There will only be confirmation of a complete impulse wave since B when we see a corrective wave of larger size than any corrective wave higher since B.  This confirmation is then only a "signal" on the larger website that needs conformation to change the view on the front member's page.

Since it is unlikely at best that an impulse is underway since (4) and a double zigzag higher underway from (4) is not that likely, the impulse underway from B should terminate the rally beginning at (4) and this should happen sooner than later.

In the longer-term, weeks to months, the picture remains bearish.  The reason is that there are only mediocre to poor bullish wave counts that allows for higher prices after an impulse wave since B and a zigzag-family pattern since (4).

The wave higher since 2009 remains uncertain and works well as both an impulse or single zigzag wave.

very short-term (hours): bullish

short-term (hours to days): neutral to bearish

medium-term (weeks): bearish

long-term (months to a year): bearish

very long-term (years-decade): neutral

Finally, if anyone is in the Minneapolis, MN, USA area on Thursday, you can come hear me give a free guest lecture for an hour at the local TCTG (Twin Cities Trading Group) Group.  The last speaker for this group was Ralph Acampora.

Waiting

Last time the possibilities from late 2013 to the present were discussed in depth and these have not changed.  As stated 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."  The sideways possibilities remain weak.  For a full explanation of where these views come from, please visit the last post here.

From wave (4), there can be a zigzag higher to ii of (a) or just an impulse to A then zigzag-family wave correcting to [w] when the area is taken in isolation.  Neither option is compelling for the reasons discussed last time.  But the possibility of this double zigzag higher has weakened due to the large size of the congestion area this week in relation to the early subwaves higher in [ii] of C; it is difficult to view wave [iii] incomplete.  The best view of the structure higher since B is an impulse underway where its 4th wave is underway or complete.  More on the details on this below.

The other double zigzag possibility where 'w' terminates at (b) of [y] (triangle divides two impulse waves in the 'w' zigzag) remains a weak option because of the complexity involved with the pattern.  The market tends towards simple moves.  Without over-thinking the situation, so far there are three waves higher since the wave (4) low.

Following [ii], the impulsive structure breaks down into two possibilities depending on how the action from ii of (iii) to v of (iii) is looked at.  If ii to v is one impulse, then the impulse higher from (ii) terminated at [iii] or the high reached Monday 6/2.  Because wave (ii) is so small relative to the action following the 6/2 high, and still assuming ii to v is one impulse, the impulse higher since (ii) very likely terminated at [iii] and the impulse higher since [ii] terminated at the 6/2 high.  If ii to iii is one impulse, the structure above in color makes the most sense.

No matter how ii to v is viewed, breaking (ii) to ii down into 2 or 3 sets of 1st and 2nd waves is a possibility.  But of the numerous new options this provides, there is only an added complexity and no added benefit; the impulse higher beginning at [ii] terminated at [iii] or the 6/2 high unless there is a major proportionality problem within the wave (again, the action following the 6/2 high is much larger than any corrective wave preceding it except for [ii]).  Also the size of the corrections within i are a bit small relative to ii of (v), iv of (v), etc.

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