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Monday, October 1, 2012

Elliott Wave Update ~ 1 October 2012

A bit of a shooting star potential candle was produced today.  At one point at the high today the advance/decline ratio was 5.5:1 on the NYSE and the UP/DOWN volume ratio was 8.7:1. Yet the day ended at a mere 1.6:1 on both.  Lots of churning again.

A leading expanding diagonal triangle may be in the making. There are no clear-cut impulses down yet the subwaves and count does fit into a leading diagonal count. Lets review our guidelines for leading diagonal triangles:

Per Elliott Wave Principle (Frost/Prechter):
- Waves 2 and 4 of a leading diagonal always subdivide into zigzags.
- Waves 2 and 4 each usually retrace between .66 to .81 of the preceding wave

So the guidelines are being followed so far with each wave ii and iv having retraced above 62% of their preceding wave.
The ending bearish rising 2+ year wedge count is still viable and our top count.
 Local SPX candle chart and how it would fit into a leading diagonal count and interacting with the 2 year wedge count.  At some point, if this is a true wedge, prices would come crashing through the bottom wedgeline.
The subwaves since the peak price do not have clear impulses down, yet if the pattern emerging is a leading expanding diagonal triangle, they do not have to be. In fact they tend not to be. We need a lower low to confirm the pattern.

Here is Prechter on Leading Diagonals in EWP:
"...a leading diagonal can also take an expanding shape. This form appears to occur primarily at the start of declines in the stock market."
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