Dow Wave Counts

Below is a nine month Dow chart showing the wave counts. Click to enlarge.

Minor Wave Four

The swing down from the November high could be the first wave of minor wave 4 from the July low. Unless it forms a larger zigzag, Tuesdays low may be the price low of minor wave 4. If that happens, support is at Dow 10900.

Minor wave 4 would then be followed by minor wave 5 to new highs and then a larger major wave 2 correction. A move down to the next support at 10700 may indicate that primary wave 2 is not complete.

Fifth Wave - 11/8/10

Wednesdays Twitter update said the NY composite index may be breaking out of a sideways wave 4 pattern from the Oct 13 high and a 1-3 wk 5th wave rally may ensue and the Dow may surpass the April high on that rally. That happened on Thursday/Friday.

The alternate possibility would indicate that the 5th wave will have already topped by today followed by a correction of some sort.

The strength of the market since the late September low indicates that the four year cycle low probably bottomed at the July or September low. The rally from that low usually lasts at least one year so there are several months to go at least.

The alternate count shown in the last few blog updates was a for a Primary wave [B] or [2] low at the July or September low. That now is the best count. An updated chart with counts will be posted later.

Dow Wave Counts - 9/30/10

Below is a nine month chart of the Dow that shows the current wave counts. Click to enlarge. With todays key reversal with higher volume, the (B) or (X) wave up from the early July low may be complete. If it's an (X) wave, the next low may hold above the late August low and has support at 10475, 10285 and 10085.

Potential Double Top Here - 9/22/10

The 7/28 update indicated intermediate wave (B) up from the late May low was at or near completion. The Dow made a short term peak of 10585 the following day,with the final top occurring just 7 trading days later on 8/9. That top of 10719 was just 9 points above the 10710 updated price target given in the twitter feed and less then 1% above the initial 10615 target.

The 7/28 update also called for the potential low of intermediate wave (C) and primary wave [B] in early to mid September or mid October. The Dow went down from the 8/9 top to form a triple bottom on 8/25 to 8/31. The final low of the triple bottom occurred on 8/31 just one day before that 1st early to mid September time target.

The subsequent rally has gone slightly above the 8/9 high in what may be a minor wave C expansion of intermediate wave (B) up from the early July low. That still looks like the best count, however intermediate wave (B) could still zigzag upward to form a more complex structure such as a minor wave C ending diagonal or the (B) wave of a flat. In that case, the next price targets up are 10850-10950 and near or somewhat above the April/2010 high. The lower targets are near 10540, 10400, 10215 and 10050.

As long as intermediate wave (B) does not move much above 10950, the 8900 and 8300 targets given on 7/28 are still a valid possibility for the low of primary wave [B or 2]. A higher target in or near the 9400-9600 range has also been identified. The other levels should also be expanded to in or near the 8700-9000 and 8000-8325 ranges. The mid October timing cluster given 7/28 has been expanded to early/mid October.

The alternate count given on 7/29 showed the April/2010 high as being the end of primary wave [1] with the July low completing primary wave [2]. That is still possible but the upmove from the July low looks more corrective than impulsive. The July low should have also been labeled [2 or B]. An upmove much above 10950 increases the chances for that count. A chart with Updated wave counts will be given shortly.

Wave Counts - 7/29/10

Below is a six month chart of the Dow showing the wave counts. It is now looking like the Dow made its high this morning without reaching the .62 retracement given yesterday. Click chart to enlarge.

Intermediate Wave (B) Ending? - 7/28/10

Minor wave C up from the early July low is near completion or may have completed at Tuesdays high. Minor wave C will complete a zigzag up on the Dow from that low. I suspect minor wave C is also the end of intermediate wave (B) up from the late May low. The 62% retracement of the move down into the July low from the April high is at Dow 10615. That is the best target price for the top of wave C(if Tuesday was not the top). A move much above that level next week may negate this outlook.

The next wave down from the wave (B) top has the potential to go significantly below the July low. If that happens the price targets for an intermediate wave (C) low are 8900 and 8300. Those are the 50% and 62% retracements of the bull move up from the March 2009 bottom. That low may complete primary wave [B] down from the April/2010 high.

Wave C's in time are usually between .62 of wave A and 1.62 of wave B. That calculation points to the period between August 16th and November 11th for the low of primary wave [B]. In that period there is a timing cluster due in early to mid September which is the most likely time for the wave [B] low to occur. The next most likely time is mid October when a weaker timing cluster is due. I will be posting charts showing the wave counts.

Stock Update - 5/23/10

Are now in a time period until the end of the month that could bring a significant low for stocks. That outlook could bring a test of the mid May and possibly April tops. Must first get beyond the trendline that extends from both tops. Once the low is in, the rally could last until the last week in July. The price low may have been on Friday but if the Dow goes back below the May 6th low, the next support is 9400-9700.

If the bull move up from the March/2009 low to the April/2010 high was wave A of a zigzag, then wave C of that zigzag looks most likely to top around the 1st quarter of 2011. That is based on statistical wave relationships, technical indicators and cycles that I look at. The Fibonacci price targets for a top are Dow 11260-11610, 12375-12500 or near the 2007 high of 14198.

Stock Update - 3/23/10

Todays price action in the Dow invalidates the ending diagonal count. The commentary from 2/19 now appears the correct outlook:

"A mild correction may form the right shoulder of a head and shoulders bottom followed by a rally above the January high. If so, that rally could be quite strong and last possibly into late Spring or Summer. That could indicate the original bullish wave three of three count(or wave five) from the March/09 low was the correct wave count. The wave X of (X) of [4] count shown last time, could also be valid in that scenario. It all depends on how the wave structure develops."

If this is a wave five up from the March/2009 low, then it must be less then 2100 points. That is because wave three was 2100 points and wave three can never be the shortest wave. 2100 points up from the Feb. 5th low of 9823 gives 11,923 as the maximum length of wave five. However if this is wave three of three or a wave X, then there is no such price limitation. For now the next price target is 11,020.

Note: After one year of doing this blog, this will be the last of the regular blog posts for the indefinite future. That is so I can spend more time on my trading and do some research. However , I will do an update if I can identify a major turning point such as the July/2009 or March/2009 lows.

Dow Making Fifth Wave Top? Plus New Wave Count - 3/14/10

The Dow appears to be forming an ending diagonal fifth wave up from the 3/9/09 low. According to Elliott Wave rules, that is the only possible count since ending diagonals only occur in the fifth wave or C wave position. That would be followed by a correction larger than any correction since that 2009 low. See chart below for new wave count.

Wave three, which cannot be the shortest wave, was 426 points, so wave five must be less then that. 426 plus the wave four low of 10508 gives 10934 as the max high for wave five. However it only has to go one tick above the January high to be a valid fifth wave.

Timewise, the fifth wave should complete by the middle or end of this week. Tuesday is the Fed meeting, so that may be the most likely day for a top.

Nine month chart of Dow Ultra ETF, symbol DDM (click to enlarge)

Stocks, Quick Update - 3/9/10

It's now possible to count five waves up from the 2/25 and 2/5 lows. This may be a good place to take profits.

Update - 3/07/10

Stocks
Last weeks stock update was pretty much 100% accurate as this initial surge has taken out the previous week high but has not gone beyond the January high except for the Nasdaq. The Dow and S&P may soon follow the Nasdaq. If that happens within the next two weeks, there is some concern that the markets are completing five waves up from the March/2009 low, as there is a strong cycle that is due in that time frame that could bring a top. All it takes is a one tick move above the January high in both indixes for that to be possibility. Beyond there the next price targets are Dow 11010 and 11060.

However right now the technicals and price action are strong, so the bias is that this rally is part of a larger wave up. So the analysis from 2/19 is still the best outlook:

"A mild correction may form the right shoulder of a head and shoulders bottom followed by a rally above the January high. If so, that rally could be quite strong and last possibly into late Spring or Summer. That could indicate the original bullish wave three of three count(or wave five) from the March/09 low was the correct wave count. The wave X of (X) of [4] count shown last time, could also be valid in that scenario. It all depends on how the wave structure develops."

Gold
Per the 2/28 Gold update, GLD has gone above the February high to confirm the inverse head and shoulders low is in. The initial price targets remain at 113 and 116.

Stock Update - 2/28/10

The Dow has come down into Thursday to form what appears to be the right shoulder of a head and shoulders bottom. That is the outlook that was described in the last stock blog update on 2/19. Last weeks high needs to be taken out first to confirm the low is in.

The low on 2/25 was on the day a 3.75 month cycle was due and which will probably take the market to and beyond the January high as also indicated in the 2/19 post. There are some cycle issues that may bring some sideways price movement into mid-March after this initial advance off the low. The initial advance probably will not take out the January Dow high.

Gold Update 2/28/10

Gold looks to be completing the right shoulder of a head and shoulders bottom. That will be confirmed with a move above the February high. The February 5th low of 102.28 is within the range of the 102-103 target given February 4th. The 2/19 post called for an 1-3 week correction and while the price low may have been made on 2/25, the full correction may last longer timewise.

The initial price targets for this up move are 113 and 116 on GLD. These targets are shown as white horizontal lines on the chart below.

Nine month chart of GLD, click to enlarge

Update - 2/19/10

Stocks have moved up and are testing the 50 day moving average as indicated earlier this week. This may stall the advance and bring at least a short term correction into the end of the month. A mild correction may form the right shoulder of a head and shoulders bottom followed by a rally above the January high. If so, that rally could be quite strong and last possibly into late Spring or Summer. That could indicate the original bullish wave three of three count(or wave five) from the March/09 low was the correct wave count. The wave X of (X) of [4] count shown last time, could also be valid in that scenario. It all depends on how the wave structure develops.

The wave X of (X) of [4] count also would allow for a correction below the early February low. That scenario may bring a drop into an early or mid March low. The two bearish counts shown last time could also still be valid, but the bullish scenarios seem more likely as the technicals have improved rapidly.

GLD

The gold chart is looking more bullish, but short term may correct for 1-3 weeks. More detail will be provided on this later.

New Wave Counts and Long Term Update - 2/06/10

The strength of last weeks decline along with poor breadth and the breaking of support levels most likely indicates the bullish wave three count is incorrect. Also, it is not possible to come up with a good five wave impulsive count from the March/2009 low to the January/2010 top. That means we have completed a large corrective wave of some sort at that top.

The March/2009 low is best counted as the ending wave C of a very large flat from the 2000 top. That was shown in the initial long term wave counts given in the March/2009 post. The primary long term count was that a new multi-year bull market had begun, while the alternate bearish count called for a B wave retracement of the Oct/07 to Mar/09 decline followed by new lows below the Mar/09 low. There is another count that was not shown that now appears to be the best count. That count labels the bull move from the Mar/09 low as an X wave. The X wave may end near or somewhat beyond the Oct/07 top. The X wave would then be followed by another very large, probably multi-year corrective pattern. That corrective pattern could be a triangle, zigzag or another flat.

The two alternate bearish counts labels the March/2009 low as wave (A) of a large zigzag within wave [4]. With these two counts, the Oct/07 top is labeled as wave [3] up from the 1932 low. The first bearish count labels the January/2010 high as wave w of B of (A) of [4] while with the 2nd bearish count, the January/2010 high is labeled wave B of (A) of [4]. Both alternate bearish counts would bring new lows below the March/2009 low sometime in 2010 or 2011, but the 2nd alternate bearish count means we are already on the way down below that low. The first bearish count would bring new highs above the January/2010 high in 2010 or 2011, but below the 2007 top.

The updated bearish wave counts are given below. The bearish counts given previously have been analyzed and revised as shown. Initial price targets for all three of these counts are the same as given previously: Dow 9700, 9100-9300(strongest) and 8600-8800. The potential time target is still early/mid March. A close above the 50 day moving average before March 1st without taking out the current lows may negate these counts.

Chart: Five year chart of Dow Industrials (click to enlarge - if still to small, try ctrl +)

Update - 2/4/10

Stocks

The Dow today closed below the 10021-10075 support area. The test of last Friday's low was a failure as that low was broken. The large decline did technical damage that indicates the bullish wave three count from the July/2009 low may not be valid. The odds that we have completed a primary wave (B) or wave A of (B) retracement of the entire October/07 to March/2009 decline are now at least 50/50. That is the alternate count given in the very first post in March/2009.

The wave A of primary wave (B) count seems to be the better count at this time and would bring a higher high in 2010 or 2011. That count means wave B of (B) began at the January top. Initial price targets for this decline are Dow 9700, 9100-9300(strongest) and 8600-8800. That could happen by early/mid March when the next significant cycle confluence is due. A chart will be provided by this weekend that will show these new counts.

GLD

Gold also went below last weeks low and now appears to be heading for a mid-February low when the next gold cycle is due. Wave count is now not clear but I remain long term bullish. The next support is 102-103 given previously and stronger support at 99-101.

Update - 1/31/10

Stocks

The Dow made a slightly lower low on Friday at 10044 and closed at 10062, both within the price range for a low given last week. All major indexes closed at Fibonacci and/or trendline support and sentiment has gotten very bearish. Would not be surprised to see a strong rally early in the week followed by a possible retest of the low later in the week. If Dow 10021 does not hold next support is around 9800. If 9800 does not hold, may have to look at new wave count possibilities.

Gold

GLD went below the December low on Thursday which may negate the triangle formation. It may also indicate this is another wave two instead of wave four but it's to early to tell. There is a gold cycle turning up this weekend and price closed just above fib support that was touched on Thursday. The wave count also looks complete. The low should be in
but if not, the next support is 102-103.

GLD Wave Count - 1/24/10

Below is the GLD wave count showing wave (4) in progress. Gold stocks appear to be completing a large zigzag which helps to confirm this count.


Chart: Six month chart of GLD

New Dow Industrials Wave Count - 1/24/10

The last stock update called for the up move to continue to at least January 13th before a correction. The 14th ending up being the middle high of a triple top. The final top occurred on the 19th which was followed by a sharp selloff into Friday's close.

It appears the best count at this point will label this decline as wave C of a running flat from the October high as shown on the chart below. The most likely support area for this wave is Dow 10021 to 10075 sometime this week, before Friday. That flat would complete wave (2) from the October high. That means wave (1) of [3] from the July low ended at that high but the good news is that wave (3) of [3] is about to begin.

The alternate count would label this decline as wave a of Y of (2). If so, wave a of Y would be the first wave of either a flat or triangle and the correction has some time to go timewise but the price low could be this week.

Another alternate count would label the current correction a wave [4] from the March/2009 low. Wave [5] under this count would have to be shorter than the wave [3] length of 2000 Dow points since wave three can never be the shortest wave.

Chart: One year chart of DJIA

Update - 1/10/10

Stocks

Not much change since the last update with stocks continuing a steady move up. The S&P 500 and Dow still appear to be in wave (3) of [3] from the March/2009 low as detailed in the November 22nd post. The current up move should last at least until the middle or end of this week before any correction.

The previous short term price target of 10644 to 10683 on the Dow has been reached. The next target is 10940. The target for wave (3) of [3] remains 11720 to 16602 by mid July.

In the very first post last March, the March 6th low was labeled as an ending wave [C] of a very large flat correction from the 2000 high. That was the primary count and it still looks like the multi-year or multi-decade bull market that was forecast is correct.

GLD/Gold

GLD has continued to move up since the last post. It still looks like it is in wave B of (4) from the April/2009 low. As with stocks, the current up move should last at least until the middle or end of this week before any correction. The next price target is 114 to 115.