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Sunday, June 23, 2013

Sunday, 6/23/13 update

Current preferred count is that the ES/SPX is tracing out a Minor W4 correction in a bull sequence that commenced at June, 2012 lows.

Minor W2 was a flat, so by the EW rule of alternation Minor W4 needs to be either a zig-zag or triangle style formation. The ES formed a 3 wave structure from the May 22 top with a sharp, quick sell off into a short term low on May 23 for the "a" leg, followed by a rally into May 28 for the "b" leg, after which prices traced out an ending diagonal "c" leg into the low of 1596.50 on Thursday Jun 6.  Following that the ES formed a flat correction against the downtrend which topped at a high of 1649.00 on Jun 19.  There have thus been two completed 3 wave structures since the all time highs of May 22nd, and these are labeled as Minute Wave "w" followed by a Minute Wave "x" of a developing double (and possibly triple) zig-zag.

The sell off since the Jun 19 top can be counted two different ways: either as a five wave impulse as in the above chart or as a three wave move as outlined in the alternate below.  The internal structure of the pattern favors the impulse interpretation, in which case the move (if complete) would represent Micro Wave "a" of the second zig-zag of a multiple zig-zag Minor W4.  A Micro Wave "b" corrective bounce will be followed by Micro Wave "c" into the final low for the pattern.

Alternate #1

In this alternate the ES is counted as having completed a triple zig-zag into the Friday low of 1570.50.  This is not viewed as the preferred count because the internal structure of the Jun 19 to Jun 21 sell off counts much better as a five wave impulse than a 3 wave move.

Alternate #2

Another possibility is that the entire structure from the May 22nd top is a sequence of Waves 1 & 2 of declining degree as in the above chart.  If this is the case, then Minor W4 has quite a bit of distance yet to travel in terms of both time and price.  The biggest problem with this count is the down move from May 28 into the low on Jun 6, which is clearly a diagonal type structure and thus much better counted as a "c" wave then a wave 1.  One other note on this alternate: if it is in fact correct, then the size of move it portends calls into question it's designation as a Minor W4.  This may force a re-examination of the labeling over the last year or two.
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