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.