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Last week’s analysis expected a little more downwards movement towards the short term target at 13,255 for the first daily wave count. We did see more downwards movement but it has reached 215 points below this short term target.

I still have the same two wave counts for you. They are now perfectly in line with the wave counts for the S&P 500.

These two wave counts are different at the monthly chart level, they differ at cycle degree. Members may review monthly charts here.

Click on the charts below to enlarge.

First Wave Count.

DOW first daily 2012

This first wave count looks at the possibility that the Dow is in a very large expanding triangle unfolding at super cycle degree. However, expanding triangles are the rarest of all Elliott wave structures.

The daily chart shows the subdivisions of wave (C) black which must subdivide into a five wave structure. It is subdividing as an impulse.

Within wave (C) black wave 3 blue is complete.

When wave 4 blue is confirmed as complete then the target upwards may be calculated at blue degree also. At 14,969 wave (C) black would reach equality in length with wave (A) black. At 14,884 wave 5 blue would reach 1.618 the length of wave 1 blue.

Wave 2 blue was a relatively shallow zigzag at only 48% the length of wave 1 blue. Wave 4 blue is exhibiting some alternation in that it is a relatively deep correction at 55% of wave 3 blue. There is no alternation in structure although they do look very different on the daily chart.

Wave 4 blue may not move into wave 1 blue price territory. This wave count is invalidated with movement below 12,977.57.

DOW hourly 2012

Wave 4 blue may be unfolding as a zigzag. Within wave c pink wave (v) green has extended.

Wave c pink is 8.46 points longer than 1.618 the length of wave a pink.

Ratios within wave c pink are: wave (iii) green has no Fibonacci ratio to wave (i) green, and wave (v) green is 5.17 points longer than 4.236 the length of wave (i) green.

Within the extension of wave (v) green there are no Fibonacci ratios between waves i, iii and v orange.

Within the new upwards trend there may be a leading diagonal unfolding within a first wave position. The diagonal should be complete in another one or two sessions and would be followed by a deep second wave correction. That second wave may not move beyond the start of the first wave. This wave count is invalidated with movement below 13,039.86.

Second Wave Count.

DOW second daily 2012

I have adjusted the wave count within the upwards movement to match the first wave count. If this upwards movement from the low labeled (X) black to the high labeled primary wave B was a three wave structure then upwards movement may be over.

At the monthly chart level this wave count has a very slightly higher probability than the first wave count. This wave count sees a more common structure of a double flat unfolding at super cycle degree, and within the second flat primary waves A and B are complete. This wave count is reduced in probability because primary wave B is longer than 138% the length of primary wave A.

If we have seen a recent trend change then last week’s downwards movement has given a very clear trend channel breach on the daily chart.

So far we would have seen an impulse unfold downwards with waves (i) through to (iv) green likely to be complete. Wave (v) green would reach equality in length with wave (i) green at 12,786. There is no Fibonacci ratio between waves (i) and (iii) green so it is more likely we shall see a Fibonacci ratio exhibited between wave (v) green and either of (i) or (iii).

When wave (v) green is complete then we should expect a second wave correction. This second wave correction may not move beyond the start of the first wave. This wave count is invalidated with movement above 13,661.87.