Friday, March 15, 2013
A Terminal Rally
We have a clear 5 waves up from the November 2012 low. Therefore, the market is setting up for at least a correction, if not a resumption of the larger bear market. The ending diagonal pattern previously posted has been negated due to the fact that the third wave as labeled was the shortest, which is a rule breaker in Elliott Wave terms. The Elliott Wave count is a bit muddled here, but anyway you look at it, we have corrective waves up from the 2009 low, which imply, even after new-all time highs have been achieved, this is still one large bear market rally, which, when complete, will lead to a decline below the March 2009 lows in a 4-year cycle low. That being said, the divergences currently present are less than ideal for a 4-year cycle top. The rally from November has been quite strong and has managed to trigger a Dow Theory Bullish Primary Trend Change, which, after the previous bearish primary trend change had been in place for 5 months, is quite significant. However, as we saw in the Summer and Fall of 2011, not all Dow Theory Trend Changes are equal. When everybody and their brother were calling for a bear market, we had not gotten the cyclical setup we needed to cap this rally. Tim Wood was literally the only analyst I knew of that specifically called for a move above the May 2011 highs. We must look at the statistics, Elliott Wave picture, and momentum data to determine if a longer term top is likely. Once we get the proper setup in place, and a completed Elliott Wave structure, this market will be set to resume the larger bear market. Although the Elliott Wave picture is unclear on an intermediate-term basis, I believe I may have uncovered the reason why this Grand Supercycle top is taking so long. More on this in a subsequent post. For now, our focus is on this rally from November 2012, which is in its final stages. Additionally, one can clearly see a rising wedge form the February low. This is indicative of a terminal move. Therefore, a top is just around the corner and we will have to examine the nature and extent of this coming move down. If it is corrective, that would suggest a move to new highs after a period of retracement from near these levels. If the move is 5 waves, impulsive, it would suggest a completed uptrend off the 2009 lows and a resumption of the larger bear market.