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Thursday, May 28, 2009

Top Counts D or X

I know it seems like I throw up a lot of counts but bear with me. The market is working itself out in corrective mode for the past 3 weeks. I can only go with what the market gives me every day. The top counts have narrowed down to basically 2:

1.) Bullish triangle that is taking weeks to develop. How the waves move from peak to peak can be maddening if your looking at squiggles but if you step back and look at the forest its fairly straightforward ABCDE in a typical triangle fashion. The key is that 879.61 is NOT breached on any subsequent move lower. Once the E spot has been found, a hard thrust up will take the markets higher above the 200DMA in another corrective wave of Intermediate size.

2. ) A 3-3-5 flat developed from the 930 SPX peak the end of which is marked with a Minor blue W wave which would be the first corrective pattern of a double corrective pattern, also known as a "double three". A subsequent "X" wave (zig zag or double zig zag) is playing out. Once the X wave plays out the next corrective pattern in the WXY "double three" would most likely be a big 5-3-5 zig zag down that breaks through 878 support.

So that's what it basically comes down to. In one case 879 holds firm. In the other 879 breaks in some fashion lower. The break lower may not even be that much however I would think an eventual move to 830-850 (or the 38% fib retrace spot) would not be unexpected if 878 breaks. However we'll see.

The chart I posted shows the D wave or X wave, whichever one it may be. Short term moves they both imply basically the same thing. Most can understand the D wave in a triangle. For those that have the Elliott Wave Principle, see Figure 1-48 for the theme of the WXY wave that I am proposing. For those that don't have the book, it shows a 3-3-5 flat for wave W, followed by a zig zag X wave, followed by a final Y wave zig zag that ends lower than W.

The W and X waves gives the *appearance* of a triangle but ultimately is not. Its a false pattern. I am not saying this is a false pattern here because frankly the market decided on numerous occasions that 878 -880 is important support so who is to argue that until proven otherwise?

Other variations on the 2 themes above is that the X or D wave actually ended at 913.84 on Wednesday's peak or the E spot was actually hit today and the market is fixing to get real bullish. I think the E wave hit was a false bounce for now and tomorrow should prove that out.

And ideal D or X wave spot would be the space between 913.84 and 924.6. In either case, the market will be heading back down toward support under 900 again. How bearish the move is will determine if it was a D wave or X wave peak and if 880 will hold one final time or not. And that I can only guess.
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