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## Tuesday, February 8, 2011

### Impulsive vs. Corrective

Is the wave since July 2010 an impulse wave, or a correction?

Us Ewavers are trying to answer that question. And the answer is: it is not clear cut at all.

I have done quite a lot study regarding impulsive waveforms and how they manifest beyond the standard textbook definitions (see Not All Five-Wave Moves Are Impulses: A Short Treatise on Elliott Wave, Another Impulse Wave Study: A Look at the 1974-1975 Low and Rally, Historical Count: 2002-2007 and Five-Wave Structures Revisited: The Identification of an Impulse Wave)

I understand the impetus for wanting to count it as an impulse. People want to count it as a 5-3-5 zigzag for P2. Or even a 1-2, 1-2 up for a new bull market. But quite frankly, I think both of those counts are bogus as I discussed here.

Here are a few thoughts regarding the degree to which the July 2010 - now wave exhibits impulsive characteristics.

The July 2010 - now wave is a better fit for an impulse than the Mar 2009 - Apr 2010 wave is. .... And that is about as strong as the argument gets (i.e. not very).

- Two is a deep retrace wave. (Ideal)
- Alternation in both form and severity between 2 and 4 (Ideal)
- Minor 3 accelerates relative to Minor 1. Not overtly so however (Acceptable)
- The internal wave structures of both Minor 3 and Minor 5 are not clearly impulsive (Non-Ideal)
- If Minor 3 were "lazy" (which it is) then Minor 5 should be very strong and cleanly impulsive. That is not occurring (Non-Ideal)
- Clear deceleration as the Minute subwaves progress (Non-Ideal)
- In the Minute subwaves, there is clear overlap in the middle of the wave right where the 3rd waves should be extending, or at the very least the most impulsive (Non-ideal)
- First wave are the strongest Minute subwaves in both Minor 3 and 5 [see relevant observations here] (Non-ideal)

So how does this stack up as an impulse wave? I would give it maybe a 4 or 5 out of 10. .... Far from a ringing endorsement.

I was reserving judgement on the impulsive vs. corrective call because I wanted to see how Minor 5 played out. If Minor 5 turned out to be a clean impulse, then some of my observations above would have turned to support for an impulsive count. But Minor 5 has turned out to be very similar in character to Minor 3, with the same mid-wave deceleration and overlapping.

In short, I don't buy the wave as an impulse.

I think the corrective option is a much more compelling fit.

Either way, I don't much care. I still do not think that whenever this wave ends that it will be the 'top' before a major downleg / crash. I think there is still more in the tank of this cyclical bull (even though there will be increased volatility in the coming years) before the secular bear market resumes.

I continue to think that this secular bear market is far more complicated than most are assuming

See more thoughts here: Macro Thoughts and Observations. Is the Bear Market Dead? Is this the Start of a new Secular Bull Market? and here: Bear Market Momentum Internals: Examination of Moving Average 'Price Stretching'