Volatility on a Complex Corrective Wave ~ The Risk Averse Alert

Monday, May 16, 2011

Volatility on a Complex Corrective Wave

The S&P 500's volatility appears poised to increase...


This sets up well for a sell-off slated to complete the fourth wave of five waves up from late-June 2010 bottom.

Having commenced early-November 2010, volatility registered during wave a of 4 into late-November was exceeded by volatility registered during wave c of 4 into mid-March bottom, despite wave c bottoming above wave a's bottom. So, with wave e of 4 thought presently unfolding (set to complete an Elliott "contracting triangle" complex corrective wave), one wonders if coincident volatility upcoming might spike above that registered during formation of wave c of 4.

Since wave c's mid-March bottom stands to be considerably more challenged by wave e of 4 than wave c of 4 challenged wave a's late-November bottom, one might think volatility likely to increase above that registered during formation of wave c of 4. Then again, the measure of an Elliott third wave's dynamism (in this case, wave c) might find volatility during formation of wave e of 4 falling short of that registered mid-March when wave c of 4 was forming.

This might be worth keeping an eye on for the sake of confirming an Elliott wave count presently supporting the probability that, the market's levitation extending its counter-trend rally off March '09 bottom, although nearing completion, still has legs enough to postpone collapse for some weeks yet...

Fast Money
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