Elliott and a March 2009 Bottom Break ~ The Risk Averse Alert

Saturday, March 23, 2013

Elliott and a March 2009 Bottom Break

Here's one prospective view, past and forward, offering a certain sense of what the broad market's technical backdrop developed here this week is suggesting 2013 could have in store...

We said October 2007 marked the peak of a 5-wave advance in the NYSE Composite Index dating back to 1932. Since 5 waves down into March 2009 bottom evidently have unfolded, we can be certain the Elliott corrective wave begun October 2007 is not yet completed. These unfold in 3-waves not 5. So, March '09 bottom but marks the end of wave A. Wave B has been forming ever since and is still some distance from its completion. There's still wave C upcoming, as well, whose objective targets indexes falling to levels last seen in the 1987-1994 period.

Best case forward, support on which setbacks since 2010 have reversed could hold up yet again. That said, "hold up" could bring the NYSE Composite a not so pretty 6000 print. Or worse. Not drawn is possibility wave c of (b) of B crushes the market, sending the NYSE Composite far lower than its March 2009 bottom, only to find wave (c) of B carrying the index back up again to that same bottom (but never extending above it): a so-called "running correction" in Elliott parlance. Subsequently, a wave C down to the final resting place at index levels last seen in the 1987-1994 period. Wave C could even take some years to unfold, particularly were one wicked "running correction" on the verge of developing its worst leg, with a trap about to be sprung. Picture wave C forming a "descending triangle," a falling wedge extending five years, say, and just torturing the living snot out of those who will be trapped should wave c of (b) of B upcoming fall through March '09 bottom like it wasn't even there. This is one possibility forward here.

We have many times contrasted the market's advance since early-October 2011 to its advance off late-June 2010 bottom. Here's a color coded curiosity for your consideration.

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