For the moment let's regard this month's advance to new high ground since March '09 bottom a further (and more significant) substantiation (following last month's brief lift above April 2010 peak) of prospect that, levitation might continue for some months more.
Indeed, one possibility within the realm of this prospect was developed here a couple weeks ago. A "rising wedge" forming in the fifth wave position might have begun unfolding at the late-June 2010 bottom. This possibility remains valid. Thus, the market's further levitation could leave waves 2-5 ahead (yet with very limited upside to be gained, much as already has been the trend over the past year).
Yet an alternative levitation possibility might have been "telegraphed" during the market's recent five-wave advance off late-August 2010 bottom. This possibility assumes quite fairly that, early-November top marked the end of that five-wave advance — an advance whose fourth wave formed an upwardly biased triangle extending for a longer duration than previously had been considered. Something similar to this fourth wave might yet develop over months ahead, and so, sustain the market's levitation...
Like the "rising wedge" possibility, this one also places the end of wave (4) (of five waves up from March '09 bottom) at late-June 2010 bottom. Since then, the first three waves of wave (5) appear to have unfolded, with wave 3 of (5) ending early-November 2010. Upwardly biased wave iv of 3 (forming from mid-September to early-November) might offer insight into what lies in store over months ahead.
One objection toward the market's advance off late-August bottom has been made recently in relation to the performance of the NYSE McClellan Oscillator. Yet if you look closely, you will see that, wave 3 of iii of 3 of (5) (unfolding on September 13, 2010) coincided with the NYSE McClellan Oscillator's peak since late-August bottom. So, the above wave count gains considerable substantiation as a result.
Channeling of waves i-v of 3 likewise helps substantiate the above, alternative Elliott wave view. The market's behavior in relation to this channel since wave 3 ended suggests a hard turn lower might be at hand, too. Increasing underlying weakness revealed by the NYSE McClellan Oscillator bolsters this possibility, as do NYSE Bullish Percent Index divergences noted Friday.
Yet formation of an a-b-c corrective wave from early-November top might complete but wave a of 4 of (5). Waves b and c (and, indeed, d and e) of 4 of (5) could yet develop before a final lift forming wave 5 of (5) unfolds, and completes the market's five-wave advance off March '09 bottom.
True as it is that, way back in late-2008 I strongly suspected the market could react back to levels at which it presently trades (this following 2008's disaster), I never really accounted for such a prolonged duration being spent keeping the coyote in suspended animation, this after having traveled over cliff's edge. Yet here we are looking at the prospect the market might be made to levitate still more.
Again, this is just a possibility. Nevertheless, much as underlying, technical weakness only has grown over the past year while the market has levitated, the same should continue were the market to levitate more. There's certainly nothing suggesting the market's weakened technical condition is on the verge of reversing, so a meager levitation breeding confusion sets up to be about the best the lot of over-leveraged fakers (all the way up to the U.S. Treasury) will be able to manufacture.
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