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Saturday, November 3, 2012

Saturday, 11/3/12 update

Last week's storm shortened trading provided a couple of nice rallies in the ES/SPX, but it was Friday's steep and sustained selling that deserves attention.  It could be the start of something significant, especially since it was accompanied by matching sell offs in the precious metals, commodities and certain currency/US$ pairs (such as the EUR/US$).  It's a fair bet that follow through selling will occur early next week.

This site is not a big fan of time cycle analysis, but there is one cycle that was noted here earlier this year that deserves a re-visit.  It's an apparent 67 week cycle that has defined some pretty significant bull-bear sequences in recent years.


As can be seen, there have been seven complete iterations of this cycle in the past ten years, and out of those seven two were failures.  But the other five outlined some fairly significant footprints.  This is especially true of the last three.  The current cycle started at the lows in October of last year and is due to bottom again in early January.  If this cycle is going to have a significant effect in it's current iteration then a bear sequence of some import should start anytime, and may already have done so with the mid-September highs. 

Concerning short term action the EW picture presents equally valid and opposing possibilities as usual.

Alternate 1  The bear sequence from the Oct 18 high into the Oct 29 low is counted as a 5 wave impulse with the 5th wave being a sloppy ending diagonal.  In this alternate the rally from Oct 29 into Friday morning's high is considered a double zig-zag correction and would dictate lower lows to come.


Alternate 2  The Oct 18 to Oct 29 sell off is counted as a completed zig-zag.  After that the rally into Friday morning's high followed by the sell off during the rest of the day on Friday are a 1st and 2nd wave of a developing bull market impulse.


Alternate 2 is eliminated by a drop below the low of ES 1393.00 of Oct 29.  At this point that eventuality seems likely to occur.

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