Technical improvement registered via RSI and MACD late today—this contrasted to late last Thursday (Oct. 18th) when the 2nd wave of 5 waves down is seen forming—raises prospect the market's softness over the past two-and-a-half days rather finds major indexes approaching a near-term floor. And why not? Today's final hour should do wonders to motivate the "buy the dips" crowd to pony up only more.
With completion of wave a of 4 prospectively a 5th wave down from last Thursday's peak away, an imminent challenge of the S&P 500's rising trend line off its early-October 2011 bottom thus seems reasonably in order here. Subsequently, the "buy the dips" crowd just might send the S&P 500 slightly above its September peak, and in so doing complete wave b of 4, while at the same time satisfying the Elliott Wave Principle's "alternation guideline," as well. Indeed, should these developments in fact occur the above wave count distinguishing the component waves of a "rising wedge" effectively would be further confirmed, and so only raise the probability of market negative portent this wave form is known to signal.
Now, it's entirely possible I am rushing the wave count distinguishing the prospective component waves of wave 4 as indicated above. One thing worth noting on this account is wave b of 2's formation earlier this year. As you can see, wave b of 2 subdivided into 3 waves, the likes of which whose "b" wave did not fall below the point from which its "a" wave began. The Elliott Wave Principle's "alternation guideline" suggests wave b of 4 is likely to develop differently in contrast.
Needless to say, a fairly range-bound, yet, too, buoyant market appears in store over the immediate period. Again, I would look back to April when wave 2 was early in its formation to gain some better sense of technical developments likely ahead. At this point in wave 4's formation it is unclear whether index RSI and/or MACD might sink below their respective lows registered during formation of wave 2, which in so doing would provide further evidence of increasing exhaustion, thus confirming formation of a "rising wedge" off October 2011 bottom and, furthermore, most suitably completing the market's counter-trend rally since March 2009. Whether by these technical measures or others, however, I rather expect exhaustion to be amply evidenced still further than already has been noted so far, and so likely set up for disaster those who today advise we "buy the dips."
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