God Save Our Sinking Ship Follow-Through ~ The Risk Averse Alert

Tuesday, September 11, 2012

God Save Our Sinking Ship Follow-Through

As promised, following is a prospective Elliott wave count labeling the S&P 500's a-b-c "zig-zag" up from early-October 2011, this forming wave b of (b) in a larger a-b-c "zig-zag" up from March '09 bottom.


Probably the most interesting facet of this prospective wave count is the zig-zag's "b" wave, seen taking the form of a so-called "running correction," a special 3-3-5 Elliott corrective wave whose appearance either precedes or follows an extended move in the direction of the main trend. Being that the market's move up over the month of October 2011 simply was monster ("God save our sinking ship!"), and being that well-established overhead resistance is fairly at hand, it's safe to assume the running correction appearing in the "b" wave of the zig-zag up from early-October followed the extended move forming the zig-zag's "a" wave.

Now, per this zig-zag's "c" wave, the Elliott wave count indicated above is a tentative take on a prospective "rising wedge." Even if this special Elliott wave form in fact is unfolding off early June bottom, its component five waves (each subdividing in a-b-c fashion) could unfold over a longer duration than the above view suggests. In fact it's possible three waves up from early June bottom might end up forming but the rising wedge's first wave, thus raising likelihood the market will hold up for some weeks longer. Yet even were this to happen, overhead resistance reviewed here Friday, again, should put a cap on any further gains.

Fast Money
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