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The Dow has moved sideways since our last analysis.  The alternate hourly wave count that expected a trend change has been invalidated leaving the main hourly wave count valid.

We only have one hourly wave count today and if it is invalidated then we would switch to our alternate daily wave count.

Click on the charts below to enlarge.

DOW daily 2012

We have slightly adjusted this main daily wave count from our previous analysis. We expect that the new wave count provides a better fit for the structures within wave c pink especially as far as wave momentum behavior is concerned.

This daily wave count sees wave (B) black as a double zigzag correction.

Waves (i) through (iv) green are seen as complete indicating that wave (v) green is still taking the Dow higher over the next week.

There is no adequate Fibonacci ratio for wave (iii) green with wave (i) green within wave c pink.

At 14,205.82 wave (B) black would reach 138% the length of wave (A) black which is the typical maximum for a B wave within a flat correction. We are likely to see a trend change occur before price reaches 14,205.82.

At 13,566.68 wave (v) green would reach equality with wave (iii) green. This is a maximum target for wave for (v) green as wave (iii) green is already shorter than wave (i) green and therefore wave (v) green may not be longer than wave (iii) green to ensure wave (iii) green is not the shortest wave.

At 13,354.97 wave (v) green would reach .618 the length of wave (iii) green.

At 13,395.44 wave c pink would reach 1.618 the length of wave a pink.

This provides us with a possible target zone where we may see wave (B) black complete.

Movement below 12,924.71 would invalidate this wave count as wave (iv) green may not move into the price territory of wave (i) green.

A concern with this wave count is that both waves (ii) and (iv) are flat corrections. Usually we would see an alternation between the corrective structures, with that said, wave (ii) green is an expanded flat, while wave (iv) green is a regular flat, which does provide some sort of alternation.

DOW hourly 2012

This main hourly wave count looks at the structure within wave (iv) green which is seen as a flat correction.

A ratio within wave (iv) green is: wave c orange is 1.13 points shorter than wave a orange.

Ratios within wave c orange of wave (iv) green are: wave 3 purple is 12.87 points longer than wave 1 purple and there is no adequate Fibonacci ratio for wave 5 purple with either of waves 1 or 3 purple.

According to the downwards structure wave c orange can be seen as a complete impulse, therefore it is possible that the Dow will continue higher once the markets open. Wave (iv) green is allowed to continue slightly lower but it has to remain above the invalidation point which doesn’t allow much room for further downwards movement.

We should now see a five wave impulse structure higher to complete wave (v) green. The target and invalidation are the same as explained on the daily chart above.

Alternate Daily Wave Count

DOW daily 2012

This alternate daily wave count expects wave (B) black as unfolding as a zigzag correction.

Waves A and B blue within wave (B) black are complete and further upwards movement is ultimately expected within an impulse for wave C blue.

Short term downwards movement is expected within wave iv pink. Wave iv pink is unfolding as a flat correction with waves (a) and (b) green complete. Downwards movement is now expected within wave (c) green to complete wave iv pink.

Movement below 12,924.71 would confirm this alternate daily wave count as the main daily would then be invalidated.

At 12,833.86 wave (c) green within wave iv pink would reach 1.618 the length of wave (a) green. This target aligns well with the fourth wave of one lesser degree which is wave (iv) green within wave iii pink. It also seems likely that the bottom trend line of the trend channel about wave C blue would be slightly overshot which is typical for fourth waves before reversing back into the trend channel.

Movement below 12,257.67 would invalidate this wave count as wave iv pink may not move into the price territory of wave i pink.