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Sunday, March 16, 2014

Sunday, 3/16/14 update

Alternate #1


Alternate #2


Alternate #3

Lots of possibilities since the Major W3 top of Dec 31.  A problem here is that the rally from the 1732.00 low on Feb 5 into the 1887.50 top of Mar 7 can be counted as either 3 waves or 5 waves.  The 3 wave count is cleaner, the 5 wave count is awkward in spots.

Viewing that rally as 5 waves leads to the first two alternates, where Major W4 is considered complete at the Feb 5 low and Major W5 in progress since that time, with it complete at the Mar 7 top as in Alternate #1 or still in progress as in Alternate #2.  If Major W5 is complete as of Mar 7 then Primary Wave III is also done, which means a very significant top is in and a strong bear trend is underway.

But counting it as 3 waves results in Alternate #3, where Major W4 is considered still in progress and forming a flat.  In that structure, Intermediate Waves A and B are concluded and Intermediate Wave C is in progress.  Inter Wave C should reach or slightly exceed the Inter Wave A low at 1732.00 before it's done.  That low will mark the end of Major W4 and usher in a rally in the form of Major W5.

Because the Feb 5 to Mar 7 rally counts much better as a 3 than a 5 wave move the edge has to be given to Alternate #3 at this point.

The current fundamental background supports the idea that a major long term top is in or nearby.  First item is the status of the Fed money machine.  As we all know, the Fed is ratcheting that money machine back.  They're attempting to ease out.  I'm sure their hope is that they can tiptoe past any potential trouble.  But they're letting the gas out of the equity balloon - you would think that it has to have an effect.  Second situation worthy of note is the Chinese credit situation.  Bear markets are often (if not always) rooted in crises involving credit.  The Chinese have a crisis of that sort that appears to have just begun it's downward spiral.  And the amounts involved are massive.  A financial collapse in China would have worldwide impact, hence the negative prospects for US equities.

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