Monday 9/4/17 update

My Grandpa was an Italian immigrant.  I remember him as a formidable figure.  I also remember that when he got animated he would pepper his heavily accented speech with the phrase "sonnamabitch!!"  I can still hear him saying it.  This last week I heard myself muttering that phrase a number of times as the ES/SPX blew my bearish socks off.

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The ramp up this last week has opened up several possibilities.  It could be that Inter W3, which started at the election day low last November, may have concluded on Aug 8 with a top at ES 2488.50 as in Alternate #1 below.  In that possibility the 3 wave zig-zag into the low on Aug 21 may be the entirety of Inter W4 or Minor Wave "a" of Inter W4.  EW rules are that waves 2 & 4 in an impulse should alternate in form, from that standpoint the zig-zag type sell off into the Aug 21st low alternates nicely with the flat formed by Inter W2 in June, 2016.  If that zig-zag was only the 1st leg of Inter W4 then we should expect to see a triangle or multiple zig-zag formation for the balance of Inter W4.

Alternate #1

One observation of note is the relative shallowness of the Aug 8 to Aug 21 sell-off in comparison to Inter W2, which gives rise to the idea that the correction was not Inter W4 but part of an extended Minor W5 of Inter W3.  This thought is outlined in Alternate #2.

 Alternate #2

So how can we evaluate which of these possibilities is in play as events unfold?  Unfortunately the only possibility that can be easily eliminated is the idea that Inter W4 is still in progress - that alternate will be effectively eliminated with a run to new all time highs.  The question as to whether Inter W3 is extending cannot be easily answered without a lot more information - i.e. market activity.

NOTE: dotted lines show potential EW structures and are not necessarily accurate price/time forecasts