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Saturday, May 18, 2013

Saturday, 5/18/13 update

Equities continue to power relentlessly ahead.  Currently the preferred count has the ES/SPX in a 3rd of a 3rd of a 3rd of a 3rd wave, so the nature of the action fits what's expected in EW.

As mentioned last week, the EW count from the Nov 16 low has been revised more than once as the move has continued to extend.  The same can now be said of the wave that started at the Apr 18 low as it continues to surge upward.

It needs to be noted that the slope of the rally off the Apr 18 lows is steeper than any other segment of the sequence since Nov 16, and at this point the buying doesn't show signs of letting up.  The possibility in this context is that Minor W3 (red) has quite a distance yet to run and that the series off the Apr 18 lows is actually the center of Minor W3.  That series would thus be a 3rd wave rather than a 5th wave.  In that case Minor W3 is continuing to extend and the Minute, Micro and Nano waves designated in the current analysis would be revised to lower degrees.  

Possible targets for  the whole shebang from the mid-Nov lows are at 1678.50 where Minute W5 = 1.50 x Minute W1 and at 1681.50 where Micro W5 = .618 x Micro W1.


This site hasn't discussed any bearish alternates for a while now.  The reason is that they appear far less probable at this juncture given the power of the current bull move.  Also, the bearish alternate most favored had an ending diagonal in progress.  The strong push past long term resistance in the upper 1500's has blown up that thought.  But that reality does not rule out the idea that the whole structure from Mar '09 is in fact a double zig-zag which is corrective in nature rather than impulsive.

From a macro view it's worthwhile to entertain the idea that the bull move from March 2009 is one great big "X" wave that will eventually roll over into some serious bear market conditions.  It's awfully hard to dismiss the very large negative economic implications of the massive and growing U.S. public debt combined with the flood of phony money that's been funding that debt, and it seems reasonable to assume that there will be a very painful price to pay at some point.  And that price will almost certainly be very negative for equities.

From an EW standpoint it's still possible to view the bull market of the last 4+ years as an "X" wave and not break any EW rules.  The practical limit to this view is at a level where the proposed "X" wave equals a 1.236 multiple of the 2007 - 2009 bear market.  That level is at ES 1804.00.

Long term bearish alternate count

As can be seen, this bear alternate has the ES in Wave C of the 2nd zig-zag of the X wave.  Wave A is counted as a leading diagonal with a high last September, and Wave B is an irregular flat that bottomed on Nov 16, 2012.  This view allows for some further price appreciation before prices roll over into the next long term bear market.  So there's meat for all those long term bear biases out there (mine included).

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