Breaking Down

Today the market analysis that I have been giving away on this blog will only be available to subscribers.  Remember the charts above are not expressing a "primary" wave count.  Here is one quote from the members' site:

"For those following my analysis, the downward action we have witnessed should not have been a surprise.  The possibility was also evident in Alan and Vic's work as well as our consensus opinion.  Two updates ago it was stated, "any sell-off getting under [ii] of 5 will likely lead to a break under wave 4 and then a test of the 1920s... buying for any time frame is currently not recommended.  In fact this is a good time to think about initiating short positions such as getting under wave [ii] of 5 support can provide.”  Then last update I wrote, "Lower prices are expected on Thursday" with the short-medium-term indicator at "bearish to strongly bearish"."

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Still Hanging Around

Beginning with the long-term analysis of the waves, there is again nothing to add to the detailed analysis found in this update.  A sideways correction from 2014 [iii], an impulse unfolding since 2014 [iv], and a pullback of similar size of (2) following (5)’s completion followed by another impulse higher following are the strongest options if the one illustrated above in color is not taken into account.  But by a fairly wide margin, the wave count in color above is preferred.

Due to the large size of an underway sideways correction from the wave [b] high relative to the previous possible corrections since (4), and taking the larger structure since (4) into account, a correction that began at 3 or [b] is very likely complete.  [d] is clearly not 5 waves so a sideways correction is not beginning from that point unless it is part of something larger beginning at a previous high.  Keep in mind that an impulse higher from [ii] to 3 is possible and this opens the door to a possible flat lower since [b], but the structure of this impulse is very poor, [b] is used as an impulse which is not natural, and the side of [a] is then very small relative to [ii] which it would need to be paired with.

The best option for a continued climb higher is an impulse or ending diagonal wave underway since 4.  The problem with this however is the lack of respect for the ~1965 support area on an intraday basis.  The area was violated as a very large and deeply retracing wave lower since (5) has been unfolding.

At first the 3-wave looking move down to [b] this week followed by a structure resembling 5 waves higher gave a bullish look to the market.  However the breakdown that followed has moved the short-term expectation back to the bearish side.  A double zigzag down from 5 to (i) is a good option, but the surrounding context brings doubt to this possibility.  Again, the size and retracement level of the sell-off relative to 5 is a problem, but also the action today following (i).  i is very large and deep relative to the pause within (ii) and these is not a typical feature of a series of 1-2 waves higher; the corrections of waves tend to be no larger than the corrections of the larger waves that they are contained in.  Wave (ii) retraced a large amount of (i), but it is about the same size as [ii] and the waves following (ii) are strongly on the bearish side.

Of the wave counts that try to make an upward correction higher since 1 or [b] live on, the best involve a double or flat since 1.  These again face the challenge of dealing with waves after (ii) however and have an added layer of complexity which is not desirable.  Perhaps there is an ending diagonal underway since (i), but this is a stretch.

A complete impulse down since 2 would simplify the situation and work better with the action after (i) (and also allow for an additional rally above (ii) perhaps fully retracing (i)), but it would be very unusual.  There are just so few waves to work with at the bottom of the action today when attempting to balance out the [ii] region.  Better is an impulse down from (a) of [ii] to (i) but this also requires corrective waves that are out of proportion with one another.

As it has no structural problems, although it is a rare pattern, perhaps the best option worth considering besides the one in color is a 3-3-3-3-3 leading diagonal lower since 5 where its 4th or 5th wave is underway.  This allows a move above (ii), but not by much (wedging must be preserved).

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An Important Day

The action on Friday proved to be important for determining a set of possibilities that suggest where the market is likely heading in the near term.  There is more to say in the shorter-term scales than last time.

But before going into these details, note that the long-term picture remains unchanged.  For a detailed look at the reasoning behind the following summary below, please refer to this update.

"First, a sideways corrective wave lower from 2014 [iii] is a reasonable possibility worth considering when used as a 4th wave that is paired with 2nd wave [2].  But the problem with this sideways correction is that price has rallied so far above [iii] with the ‘b’ wave being quite large relative to ‘a’.  So it has been labeled “weak”, but just barely given that the larger impulse structure it is a part of is not bad.

An impulse higher unfolding since 2014 [iv] is weaker than the sideways pattern due to its complexity and the structural concerns within the larger impulse higher since 2011.  This possibility is on-par with a pullback of similar size of (2) following (5)’s completion, then another impulse higher following; or a 2010-11 triangle with impulse higher completing at (5).

The poorest options involve an additional stretching of the impulse wave higher since 2011 where a 5th wave extension is taking place or the core of the impulse wave is in wave 5 territory.  These are the remaining options discusses above."

It should go without saying that the same options exist for the wave higher since 2009.  Namely a developing zigzag or impulse where the zigzag option has been weakening as price continues higher.

Last time it was reasoned that the downward sideways possibilities since 3 or [b] are weak because of their size and the structure since (4).  The rally that has unfolded from 4 to (5) can now be a zigzag which lets a sideways correction continue and perhaps terminate sooner than expected, but this offers little benefit to these options.  For example the quickest way of terminating an incomplete pattern would be a quick test of the 1950s for a flat down since [b] ([d] is not 5 waves so a correction cannot begin there).  Then the weak impulsive option in the chart above must be used.  A correction since [b] is then large relative to all other corrections since (4) and of course there are all the structural problems with this option; e.g. using [b] as a 5-wave move and [ii] to 3 as a 5-wave move.  These structural problems are eliminated if a sideways pattern is underway since 3, but then this pattern is clearly huge relative to any consolidation period since (4).

With a correction very likely ending at 4 and the structure likely unfolding as drawn above (the other option worth noting for action following (4) is the impulsive one in text in the chart above, but this is very weak), the most important thing to pay attention to is the action following 4.

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