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Wednesday, October 8, 2014

Elliott Wave Update ~ 8 October 2014

Last Thursday's update identified the price low of wave (iii) of [i] down to be 1926.03 SPX.  It was mentioned that wave (iv) was unfolding but that it could not exceed 1978.63 which was the wave (i) of [i] price low prior to reaching a new low under wave (iii) - 1926.03.  It had to get to sub 1926 to form a valid wave (v). today it did just that.

After Monday's opening spike to 1977.84, the market proceeded to do just that - make a new low under 1926.03.  It was achieved today with a low of 1925.25. The Wilshire5000 confirmed the same wave count.

Prices have traced a "megaphone" pattern from the peak. Although not technically a "leading diagonal expanding triangle" - because wave (iv) did not overlap wave (i) - it still however makes a lot of sense that an expanding shape takes place off the peak.  Expanding shapes from peaks often can "kickoff" a new downtrend.  I consider them bearish patterns ultimately.

Why the expanding shape?  I think it represents prices overall reluctance to give up the old bull but yet in the end, prices did make a valid wave pattern down indicating a - albeit reluctant - change of trend.. Think of social mood "lurching" back and forth in great stuttering waves down for the opening shot.  Not content to make nice clean impulsing patterns off the peak after a 5 year bull, the market does what it can do try and stop the decline. Yet the pattern was traced nonetheless.

However after the megaphone pattern, the follow-up wave [ii] bounce should be sharp as it was today. And it may carry a deep upward retrace.  It should also take the shape of a 5-3-5 (a)(b)(c) zigzag up. Consider this lurch social mood's one great gasp at trying to maintain the forward momentum.

The count is that today was Minute wave [i] of Minor wave 1 down.  It took a Fibonacci 13 days. A nice time symmetry for wave [ii] would be a Fib 8 days. We'll see.

Price-wise anything from a 45 - 78% retrace in prices would be acceptable. Today's 1 day bounce already met that target range.  So anything is possible here.  The next wave down is Minute wave [iii] which should be much stronger selling than anything that occurred in Minute [i]. However, time-wise probably needs to play out more along with a solid (a)(b)(c) Minute [ii] pattern.
The Wilshire's rebound did not quite achieve the same level of retracement as the S&P.
The Industrial's lower trendline must be important.
If the market were to make new highs, the alt count is shown.

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