I analyze macroeconomic issues from a fundamental perspective, and I analyze market behavior from a technical perspective. Original macroeconomic analysis can be found here and both macro analysis and commentary can be found on my Caps blog. If you like or appreciate my analysis, please add yourself to my Following List

Saturday, August 22, 2009

Looking at the Rally Progress, Bigger Picture, and Some Wave Comparisons

I was going back and looking at the Wave A rally. I said on Friday that this was a Pathetic Wave B, and that it reminded me of the pathetic Wave B pullback in March. So I decided to go back and do some comparisons:

First A-B-C zigzag in March:
1. After a very clear impulsive, extended 5 wave move, Wave B is a meager 30% pullback.
2. Wave B is an Expanded Flat
3. Wave C is Diagonal

Middle A-B-C:
1. The meat of the "correction" takes place here
2. There is no real price retracement.
3. In fact the second X ends at about the same level as the first C
4. This makes the middle X-A-B-C-X and time extension (sideways extension) of the rally, and not a harsh price corrective wave

Final A-B-C:
1. After a very clear impulsive, extended 5 wave move, Wave B is a meager 24% pullback.
2. Wave B is an Expanded Flat
3. Wave C is .....

Okay, now here is where things get very interesting.

Right now we are seeing C wave shape up to be a very clear 5 wave structure. It has been nearly vertical so far with no hint of a harsh price corrective wave. And like I say in my last post, it seems like (at this moment) wave C wants to go out in a "Blaze of Glory".

However .... If we look at A-B-C of the first zigzag and the A-B-C of the last zigzag, the are some "spooky" similarities between A and B of both sets.

If the comparison holds true, then we can expect an ending diagonal for C, which is what Col and I were talking about on Friday.

So here is what I suggest.

1. Currently C is looking vertically impulsive
2. If we get a clear extended 5-wave sequence, then C is done
3. However we have 2 more 4th waves showing up in the sequence (based on the current count)
4. If one of these 4th waves has a severe price retrace of the previous impulse, something on the order of 61.8-78.6%, then I would suggest that this is really a B wave (since in extended waves, retraces are usually limited to 31.8-50.0%), and the previous move is an A.

What I am getting at is a way to tell early on if this seemingly straightforward final impulse for the final C will morph into an ending diagonal (which my gut is telling me it will).

I really think the overall wedge from March until Sept-Oct wants to fulfill itself and an ending diagonal seems to fit in time (extending the wave out until October) and shape.

blog comments powered by Disqus