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Saturday, August 29, 2015

Saturday, 8/29/15 update

So, was that it?  Is the correction that's been building all year done after just a few days of serious selling?  Seems like it's too quick, unless you consider the sideways track that we've seen all year to be part of that corrective process.  In that context it wasn't all that quick.

From an EW standpoint the E-mini has formed a double zig-zag into Monday's crash low at 1831.  This is labeled as Primary Wave IV in the top chart and alternates nicely with the irregular flat of Primary W II (in 2011).  EW rules allow for as many as three zig-zags separated by "x" waves in a multiple zig-zag correction.  Since the E-mini has formed two zig-zags there is room for one more "x" wave/zig-zag  sequence.  Unfortunately, using EW rules, there is no good way to determine whether that final zig-zag will occur or if Primary W IV concluded at Monday's low.  The invalidation level for further Wave IV action is all the way up at the late July "x" wave top of 2126.25.  However, it can be noted that the recent bear action was quite severe and generated "oversold" readings rarely seen. So from that standpoint Primary W IV reached it's pinnacle (not sure that's the best way to phrase it - oh well).  I'm sure the perma bulls can muster many good reasons why the correction is done, and likewise the perma bears can muster many equally good reasons why there's got to be more selling in the near future.  I'm don't believe either side can be given more credence than the other at this juncture, i.e. it's a 50/50 proposition IMHO.

The short term chart and EW count since the Monday low is equally ambiguous - so far there have been two impulse structures up since that low separated by flat style correction.  As noted in the chart, the pattern can be labeled as an a-b-c(in progress) of a corrective sequence or as a wave 1 - 2 - 3(in progress) of a developing longer term impulse.  One thing to note: on the very short term the  market reached some "overbought" markers on Friday and is due for a pullback early next week.  The dimensions of that pullback could give clues as to the nature of the rally off of Monday's bear market lows.

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