Two weeks ago I presented 4 different intermediate-term alternatives the markets could follow; see here. Now it is time to revisit those. Starting again with the short term chart, the Bull’s only impulse pattern left is IMHO a nested i, ii, 1, 2, i, ii count (see Figure 1)
This Elliot Wave count will mean we will have to see lift-off soon or it’s dead in the water, which it technically is on a break below SPX2702.
This leaves the Ending Diagonal Triangle (EDT) still on the table as a possible 5th wave higher: Figure 2. So far the market has not done anything to disproof this possibility and IMHO it is interesting to see no other (paid-for) market forecasting service I know off has considered this option; albeit it is a very real one.
The 2nd alternative, albeit IMHO a low odds possibility, is the larger Zig-Zag pattern, with a big c-wave down to come (Figure 3). Given that the big-money options flow is currently neutral it seems less likely because big-money would already be positioning for it. They are big-money for a reason… It also continuous to be the Bears’ “wet-dream”, but only as long as they keep moving their goalpost further north each week and switch from index to index to make it fit; e.g. The NAS/NDX made new ATHs and can therefore NOT be in a zig-zag pattern. Again, doesn’t mean it can’t happen, I simple view it as low odds.
The 3rd option I presented two weeks ago, was the symmetrical triangle for the S&P, and although this is still possible for the DJIA, see Figure 5 at the bottom of this update, it was invalidated last Friday as price on the S&P broke out of the triangle. This means, instead, we could be dealing with a leading diagonal pattern: Figure 4. It targets ideally SPX2820ish, followed by ideally an ~62% retrace of the triangle, which will be a fast and furious move, targeting SPX2640-45ish, and then we can still see an ideal major-5 target of SPX3150-3215. Also here this is an option very few are yet considering.
In conclusion, two weeks later and there’s still too little price data to determine which of these 4 counts is operable. Although we all want certainty there are simple, and actually often, times when the market is not clear. That’s the reality we have to deal with when trying to decipher the market and its next steps. Those who can’t understand that and only want certainty are simple in the wrong line of business. In addition and as said two weeks ago: “Anybody who claims the market will go only one certain way is thus not correctly seeing the possibilities and blinded by a certain, and set/fixed, biased opinion.” Only those who have a flexible, open minded, unbiased approach to the market will do well. Correct stop-loss-levels must therefore always be set until clarity is reached and adhered to strictly.
Thank you for reading and Trade Safe!
Arnout aka Soul
The below chart shows the possible triangle forming on the DJIA. The red and green arrows show which direction price most likely will follow on a break down or break out, respectively. Clearly a break above its 50d SMA is necessary to kick start the next leg higher. Until all that happens things are up in the air.