I have been a little puzzled in regards to how the price-action since the April 2011 low at 10,404 could fit into my long term view calling for a top in 2013 as wave D of an Expanding Triangle.
If we count the rally from the March 2009 low at 6,470 to the May 2011 high at 12,840 as a five wave rally, this would be labeled as wave A, the following decline from 12,840 down to 10,404 in October 2011 was clearly in three waves as is the rally from 10,404 to the 13,338 high on May 1'ste. 2012. If this count is correct the most likely outcome is that an Expanding Flat correction has been unfolding since May 2011. That also means that we are currently tracing out the C-leg down of the expanded flat correction. The ideal target-area for wave C will be in the 9,665 - 9,913 area.
The fine thing about this count is, that the break below 10.404 will have most call for a new long term decline towards the 2009 low and therefore it will most likely hurt the most. As will the following rally in wave C to the new all time high in red wave D.
If we concentrate on the current decline from 12,840 it follows all the characteristics of a C wave. It's fast and the corrections is shallow and when done it will be a five wave decline, which will have most look for a three wave correction from the bottom of wave C. and thereby most will be caught of guard when it rallies beyond the 12,840 high.
There is of cause no guarantee for this scenario, but I do like all the possibilities of catching most of guards.
Interesting that you see a relief rally from this point, the 200dma. Is this an ending diagonal today if we close above the 200dma on the SPX?
ReplyDeleteWill the DOW relief rally off this point starting next week since all the bad news is out and all indicators point extreme oversold?
Hi Vinnie,
ReplyDeleteI think you have misread the above post.
I'm not looking for any relief rally from here.
The post above speaks about the longer term picture and not the short term.
I specifically writes that we are in wave C down, I say it will be fast and corrections is shallow.
So please be careful. Corrections in wave C normally is very difficult to trade.
The last short term view I posted on the DOW can be seen here: http://theelliottwavesufer.blogspot.dk/2012/05/elliott-wave-analysis-on-eurusd-usdjpy_22.html
Note that the correction I was looking for fell short of it's possible target-area, which indicates the DOW to be in a very weak position for now.
Kind regards
EWS
Thanks for the link on the short term DJI. Your targets were never hit since May 22, do you still see the possibility of what you call a correction in Wave 2 or B to 12,800-13,000? Or did the drop below the 200dma negate your count? I am looking for a very oversold bounce off this last round of seeing propelled by bad news, in line with your correction prediction dating back to May 22.
ReplyDeleteI meant to type selling, not seeing, sorry.
DeleteYou are welcome.
ReplyDeleteNo I don't see any possibility for the target-area between 12,800 - 13,000 being hit after the break below 12,311.
For me the wave count is above everything else and I don't give much attention to the 200 day MA and oversold conditions in them self in a C-wave is not that important and the move tend to go on for much longer than we normally would see in wave A.
Looking at the wave-structure of what I see as wave 2 of C I label it as an expanded flat correction, normally I would expect an extended wave 3 of C after an expanded flat, which will give to a target in the 10,590 - 10,977 area.
If we are going to see a correction of Friday's lows I would only expect a move into the 12,170 - 12,253 area before the next sell-off towards 12,007 and lower.
I would be surprised if we saw a break above 12,316, but at no point do I see a break back above 12,490 from here.
I hope it makes sense. I will update the short term view before the market opens on Monday.
EWS