Remember Carl Swenlin's inverse head-and-shoulders bottom? I detailed a contrary view of this last summer. My disagreement centered on two things:
- A lack of symmetry in the shoulders.
- No volume surge accompanying upside penetration of the supposed "neckline."
Confirming this probability is the following Elliott Wave view from March '09 bottom...
There is much to say about this view, beginning with wave 1 up, unfolding from March - June, 2009. Let's consider momentum's rate of ascent over this duration (MACD). The first sub-wave of wave 1 (i.e. wave i — not labeled) saw momentum's steepest ascent ... then, during the third sub-wave (i.e. wave iii — again, not labeled) momentum's ascent was less steep ... and, finally, during the fifth sub-wave, momentum's ascent was less steep yet.
Note, too, how during wave iv of 1 MACD fell below its low mark set during wave ii of 1 (thereby providing first signs of a weakening of the advance off March '09 bottom).
Now, consider how during the unfolding of five waves up from March '09 bottom to present, MACD reveals momentum's very same decreasing rate of ascent, wave 1 versus wave 3 versus wave 5 ... as well as the same degradation wave 4 versus wave 2.
Consider, too, how wave ii of 1 (unfolding late-March thru late-April '09) had an upward bias, whereas wave iv of 1 (May '09) more or less had a sideways bias. Contrarily, wave 2 had a more sideways bias, whereas wave 4 had an upward bias, thereby demonstrating how in a like-from-like formation the Elliott Wave Principle's "rule of alternation" can be applied.
So, then, what about the fact that, relative strength has registered its strongest reading during the unfolding of wave 5 (since early-February bottom). You might recall that, last summer, when what now is labeled wave 2 was thought wave 4, the market's advance in July '09 and coincident RSI surge to its then strongest reading (i.e. since March '09 bottom) was considered a reasonable technical development since five waves up unfolding off March '09 bottom were thought forming a C-wave — an Elliott third wave, which typically is the most dynamic.
Here again, then, we see the same development ... repeating. Yet given the incidence of momentum deterioration (MACD) noted above ... and now, relative strength deterioration, wave 4 versus wave 2, the significance of RSI's present surge should be thought any less reasonable than was the case last summer? Au contraire!
A most compelling technical case — the most compelling yet — suggests the market's advance off March '09 bottom is very near completion.
You might have noticed that, the upper parallel to the channel containing five waves off March '09 bottom touches the peak of wave 3, rather than wave 1. This is in contrast to how the channel was presented last Friday. Truth be told, though, it seems doubtful wave 5 will reach this upper parallel. Considering how momentum (MACD) presently is fading in much the same manner as occurred when wave v of 1 was nearing its completion, top to the counter-trend rally off March '09 bottom very well could be at hand ... long at last.
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