We might not yet have a handle on the exact subdivisions of the waves forming the 4th wave of 5 waves up from early-June 2012. Likewise, we might not yet have even seen the 3rd wave complete (this suspicion is raised by the prospect a "rising wedge" is forming in the position of the 5th wave of the 3rd wave, a possibility revealed by black lines drawn over $SPX).
Yet it's clear that, at least 4 of the 5 waves forming the 3rd wave up from June 2012 have formed. We see typical technical weakening accompanying the 4th wave versus the 2nd, both via RSI (top panel), as well as MACD (bottom). Looking ahead we can anticipate much the same 4th wave versus 2nd wave technical deterioration as the 4th wave of 5 waves higher from June 2012 unfolds, this in relation to technical readings registered when the 2nd wave unfolded into mid-November 2012 bottom. The fact this technical weakening has yet to occur is noted via green lines drawn above.
Further highlights made above in the MACD panel show a similarity in present technical deterioration with that occurring in the September-October 2012 period, and this suggests our near-term anticipation of weakness is well founded.
All we might conclude from persisting "strength" positively impacting indexes is that, a 3rd wave's typical dynamism is decidedly being displayed. The Elliott 3rd wave we're referring to here is wave (c) whose 5 waves have been unfolding off June 2012 bottom.
Once wave (c) higher has completed we can anticipate another 3rd wave unfolding, but this one pointing lower, and much lower at that. This will be wave C completing an a-b-c Elliott corrective wave whose beginning goes back some years, whether to 2007 in the case of the NYSE Composite index or Y2k in the case of the S&P 500. At any rate, wave C lower will feature a taste of today's medicine, tough to swallow, but in reverse.
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Analysis centers on the stock market's path of least resistance. Long-term, this drives a simple strategy for safely investing a 401(k) for maximum profit. Intermediate-term, investing with stock index tracking-ETFs (both their long and short varieties) is advanced. Short-term, stock index options occasionally offer extraordinary profit opportunities when the stock market is moving along its projected path.
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