At the 240 minute chart level, the mark opened up, closed the gap at 1315 and then sold off hard. The Doji candle, forewarned of indecision, which was followed by renewed selling pressure as represented by the bearish candle. Price traded to within a point of the .382 retracement of the advance from 1279 to 1315.25. While the decline is constructive by the modest break of the lower boundary of the corrective price channel, only a five wave decline would indicate that the bears have regained control. Keep in mind that the initial decline from 1343.25 to 1243.25 can't be counted as a clean five waves. Readers of EWL, know from previous readings that there is a high probability that the decline was only in three waves.
However, that doesn't mean that a sizeable decline isn't underway before the longer term bullish trend continues. For example, what if the current wave structure is a 3-3-5 flat? W.4 (red) could decline to just above w.1 (1224.50) without invalidating the bullish count. Of course should w.c of w.4 = w.a, at 1215, then the count would be invalid as a fourth wave can't enter into the span of w.1.
For tomorrow and Wednesday the key to identifying the overall wave structure is whether the decline from 1315.25 is in three or five waves. Should it develop in three waves, then the possibility of a triangle w.4 could be developing.... but I'm getting ahead of myself, so let's remain focused on one wave at a time.
Support below the market is 1292.7 5 - 1294.75. Structural support lies within w.(a) at 1296.25. So be looking for the current wave down to complete at these levels. We'll see what transpires thereafter and I'll post intraday updates on Twitter.
Best of Trading
Hi Mike,
ReplyDeleteI got the same message from the Dow. The first move down appeared to be in three waves and that was disappointing for me. You know as I do that if it makes new highs then we will have a nine or thirteen wave extended move up. Based on Elliott Wave Theory, the only option I see for an impulse wave down is a leading diagonal. Please correct me if I am wrong or have overlooked anything. Also since I trade currency then the signals there are showing new lows for the USD after a correction. My best analysis shows that this correction should be starting into a "C" wave anytime now, and when that is over there will be new highs for the stock indexes and new lows for the USD.
Peace,
Dave
Dave- Spot on my friend. While the equity indexes present a labeling issue, the USD and commodities seem to offer better clarity. I'll be looking to go long wheat, soybean and corn via ticker symbol $JJG as I believe they have one move move up before topping.
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