Saturday, October 2, 2010

10/2/10 - Long Term and Hope Rally Count



The top chart is a 20 year view of the SPX. Sometimes I wonder if it is worth examining the wave count this far out. It's just not too practical because the count can change and who wants to wait 10-15 years to find out a count was incorrect?

Anyway, the long term chart above can be interpreted in two ways.

1. If you believe in the bearish Primary wave 3 is upon us camp, the hope rally has ended and we are on the cusp of a Minor wave 3 down to kick off a very bearish environment for stocks.

However, based on my chart above, one may interpret that the Primary wave 2 hope rally is still intact and has more room to run before the disastrous Primary wave 3. The count above implies that we are working on Intermediate (C) that targets 1350 where (C) =.618*(A) and retraces Primary 1 by 78.6%.

Though this would be considered a high retrace for a wave 2, it makes sense to me if folks who have enjoyed the bull market over the past 70 years may still be in denial.

2. If you are in the Cycle Wave C ended at the March 2009 lows as a Grand Super Cycle wave 4 camp (one I believe more than the P3 bear), then the bear market has ended and we are working on a Grand Super Cycle wave 5 bull market that will take us to new highs. I briefly posted this notion last week.

The bottom daily chart is a count that I propose if the hope rally is a 5 wave structure. Remember this 5 wave structure may be considered a Wave 1 or A at the next higher degree.

Kazoom kindly responded to last week's post as to why Cycle Wave C cannot be complete since Prechter believes the time element to the correction would be too short, 9 yrs for a 70 year rally.

My thesis would be that we could potential be in a combo corrective which began with a flat (Cycle Wave A-C). We are now in an X wave higher and then who knows what we get for the third set, perhaps a triangle?

What this would imply is that we move in a very large range over the next 10-15 years between 1500 and 800 on the SPX.

So you see, thinking longer term may not be too beneficial and those who demand a bearish Primary wave 3 could be setting themselves up for disappointment.
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