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Saturday, March 9, 2013

Saturday, 3/9/13 update

The preferred count on the ES/SPX has the market closing in on a very significant long term top.  If correct, we're seeing Minute W5 of  Minor Wave c of Intermediate W5 of a diagonal C wave in a long term zig-zag that commenced in July, 2010.

 And that zig-zag is the 2nd of a double zig-zag "X" wave correction off the Mar '09 lows.

Zooming in, the current Minute W5 is also in it's later stages:

However, this count has declined in probability a little with the very recent action.  There is a cluster of fibonacci based targets that exist from ES 1535.50 to 1546.25.  The ES has pushed through these levels and appears to be headed towards the next cluster of fib targets at 1578.50 through 1594.00.  In the process it is losing the wedge type appearance that is characteristic of an ending diagonal.  It certainly seems to have a decent head of steam, and thus it wouldn't be all that surprising to see it push past that next target area as well in coming weeks.

So it is appropriate to start considering more bullish alternates to the preferred count.  When examining the long term picture, it could be the case that the double zig-zag count is still valid, but that the internal labeling is not.  I had intended to develop a long term chart illustrating this idea, but my trading platform (TOS) pumped in an update this morning that for some reason restricts daily/weekly futures charts to three years of data.  Thanks guys.  So I'll try to talk my way through it.  The alternate would reclassify the initial move off the Mar '09 bottom into the Apr '10 high as Major Wave A of Primary Wave W (the 1st of the long term zig-zag structures), with the drop from Apr '10 into Jul '10 being Major Wave B and the rally from Jul '10 into the top of Feb '11 as Major Wave C to complete Primary Wave W.  The ensuing flat type corrective structure into the Oct '11 lows would be Primary Wave X.  Since then we've had Major Wave A of Primary Wave Y topping at the Mar '12 high and Major Wave B bottoming at the Jun '12 lows with Major Wave C currently in progress.  And this is where the major difference comes into play - we would thus now be in Intermediate Wave 3 of Major C in this scenario, which allows for some distance yet to be traveled.  Hopefully you followed all that, if I get time in the coming week I'll try to lay this out on an SPX chart.

The other bullish alternate is uber-bullish.  That count has a radically different long term perspective.  It maintains that the 2007 equity highs represented a "Super Cycle" Wave I (!!) and that the Mar '09 lows were the bottom of Super Cycle Wave II.  Since then, equities are viewed as being in Cycle Wave I of Super Cycle III.  Further, in order to accommodate all the overlapping in the structure since the Mar '09 lows it is necessary to tag the structure as a series of nested waves 1 & 2 of declining degree.  Thus the market is currently in Intermediate W3 of Major W3 of Primary W3, and accordingly has quite a lot of work to do before arriving at any significant long term top.  I did take time today to work up an SPX chart of this alternate:

I know, I know - hard to accept this possibility given the bearish economic constraints, but it is what it is - and maybe (if this alternate is correct) the market is telling us that those bearish constraints are going to be resolved favorably.  I do know that I have a very difficult time getting the market to behave to my expectations, so maybe it would be better for me to let the market indicate what it wants to do.

One final thing.  After a little head fake Feb 22 when it moved up slightly from a reading below 1.00, Al's Indicator gave a very solid buy signal on Feb 26 when it spiked up from a low of .85 on Feb 25. 

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