Saturday, 11/17/12 update

Lots of technical damage has been done to equities in the last month.  In the ES/SPX prices are down roughly 9% from the Sep/Oct high points.  Along the way some important uptrend lines have been broken and also some bullish EW counts have been disqualified.  At this point the argument that we've seen the top of the bull market that commenced in Mar '09 now outweighs the possibility of a continuation of that trend.

From an EW standpoint a Cycle degree "X" wave can be counted as complete into the Sep/Oct highs.  In the ES/SPX it can be counted as a double zig-zag.  The 1st zig-zag sequence ran from Mar '09 through the top at ES 1217 in Apr '10, followed by an "X" wave into the low at ES 1003 in Jul '10.  The 2nd zig-zag ran from that point into the Sep/Oct highs and included an ending diagonal for it's C wave.

  

There's a fair chance that Friday's low at ES 1040.25 marked a short term bottom of some sort.  The EW count since the Oct highs can be counted with a Minor Wave 1 complete at that low (Alternate 1 below) or with Minute Waves 1 through 3 of Minor Wave 1 complete at that low and Minute Wave 4 in progress (Alternate 2 below).

Alternate 1

Alternate2

Alternate 1 would dictate a decent corrective bounce in the form of Minor W2.  Alternate 2 would lead to a shorter and more shallow bounce (Minute W4) followed by another wave of selling (Minute W5) before the onset of Minor W2.

The bullish alternate here is that the sell off of recent weeks is a Minor Wave "b" of an Intermediate W5 in the bull series dating back to Mar '09.  However this possibility is pushing the envelope of what seems likely.  A move below ES 1262 before any new highs would completely eliminate this alternate.