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Thursday, April 5, 2012

Elliott Wave Update ~ 5 April 2012

Yesterday it was suggested that:

"Another lower low - even a quick gap down - would make a nice 5 wave move off the top"

The market responded exactly with a quick gap down creating yet another serviceable 5 wave move from the price high.


Technically the triangle pattern is still intact on the Wilshire5000, but it seems unlikely that is what is happening.

Rather if this is Minute [iv], a further price pullback, even a couple of more un-closed gaps down would probably be the path taken as shown here:

Why? Because in EW theory if this is Minute [iv], then an overlap in prices with the previous subwave (iv) price range is a very strong guideline.
In terms of the SPY, the unclosed gaps up would be closed in a very bearish move leaving the market deeply oversold (yet still holding near or above 1350 SPX support)
And in terms of the SPX, we are looking at 1355 - 1360 SPX price range for Minute [iv] pullback.
CONCLUSION:

1. IF THE TOP IS IN THEN:
Any rebound up early next week would be a wave (ii). Wave (iii) down would then commence.  

2. IF THIS IS MINUTE WAVE [iv], THEN:
Elliott wave theory strongly suggests that if this is wave [iv] then this wave should overlap in price to the previous subwave (iv) of [iii] price range which is 1340 - 1378 SPX. Calculating the middle of that range - 1355 - 1360 SPX - is a good target range.

Regardless, both counts generally imply the same thing near term.
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