Tuesday, September 27, 2011

EOD Update #2 - Five Waves Down [9/28/11 Update]

[9/28/11 Update]

Blankfiend in the comments section advised me of the issue with the DJT as I had it labeled. It was a simple fix and still applies. Thanks Blankfiend!

Original Post

** Please Note  : I do not have this count as my primary or an alternate at the moment. However, I thought  that I should explore the possibility of counting five waves down. Please see the last chart at the bottom as to why I still do not believe five waves down should be counted from the 5/2011 top.***

Now having disclosed the above, please see the charts for the SPX, DJI, DJT and RUT. If we were to assume that the wave structure off the 5/2011 high are indeed five waves down, it is very possible that those five waves have now completed.

1. Each chart below contains an EW channel that is constructed using the end points for wave 2 and 4 and drawing a parallel line off wave 3. Wave 5 typically terminates at the mid channel or at the lower end of the channel. All the indexes below have terminated at the mid channel.

2. The DJI, RUT and DJT have made lower lows, which is all that is required for wave 5s. SPX has not but truncation may be legit here.

3. Wave  5 nearly = 1 (see fib extensions)

4. I don't show it on the charts but there is a positive divergence with RSI and if MACD crosses up in the next day or two, a daily positive divergence will also result for the indexes that have made lower lows.

So what does all this imply? "If" and I mean "if" this is truly a five wave move down and "if" it is truly complete, we should expect a fairly sharp bounce that may retrace 50% of the entire 5/2011-9/22/11 decline,which is higher than what most folks may be expecting.

For the SPX that would = 1242 and 1272 if it retraces 62%. The 38% retracement is 1220. The Fib measurement is used at the orthodox wave 5 low at 1114.22 on 9/22/11.

This would still work with my blue count, which expects a larger rally to come before a new low (below 1100) is made.

Anyway, just some food for thought.





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