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Monday, October 17, 2011

Elliott Wave Update ~ 17 October 2011

The primary count has the SPX topping in wave [a] of Minor 2 up at 1224.58 SPX last Friday. Today would ideally start the [b] wave weakness.  A 38% Fib pullback - which is perfectly normal for a [b] wave this size - would be 1167 SPX.

If [a] topped at 1224.58 that computes to an [a] wave which was 150 SPX points long. If we get a pullback to  a hypothetical 1155 SPX for wave [b], we can use this assumption to start calculations for the subsequent [c] wave to Minor 2 peak.  If [c] = [a], then your looking at 1155 +150 SPX = 1305 SPX for Minor 2 peak.  If [c] = .618[a], you looking at 1155 +92 = 1247 SPX price peak.

Lets just say [b] pulled back a Fib 38% (1167) and [c] was .618 x [a] = 1167 +92=1259 SPX Minor 2 peak.

That is looking perhaps too far into the future but you get an idea of how to calculate the price size of an expected a 5-3-5 Minor 2 zigzag.

Any [b] wave pullback that goes over 50% and even approaches 62% of the rise since the 1074 low indicates weakness and a market unable to hold onto its gains. A 50% pullback is about 1150 SPX and 50% is also considered "normal". However a 61.8% pullback is 1132 SPX and that damages the rally and I wouldn't expect a [b] wave pullback quite so deep.

A normal [c] wave would probably reach the 200 DMA at least. Currently that is 1275 SPX and dropping.

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