Remember the option 3, the possibility of a "Diagonal Wave 5" for Dow that after completing its wave 2/5 at the current level, it would continue downwards to retest its March 2009 low of 6547 to form wave 3/5 that I have mentioned in my previous post as shown above? Dow on Friday clossing, has put on 119 points (1.5%) and Nasdaq has put on 42 points (2.5%). If one will to look at Nasdaq Chart as shown below, one will notice that the 42 points closing for Nasdaq at point Y as shown below has practically ruled out the "Diagonal Wave 5" option. Y is simply too much higher than point 4 to be considered as wave 2/5. If point Y can not be wave 2/5 then the three waves down from wave 4 can not be wave 1/5 as shown below, I have no choice but to revise my previous wave count for Nasdaq.
The only way to take care of the three down waves in early 2009 is to go for a complex A-B-C-X-A-B-C wave count. As shown in the 2-year chart above, from the peak we have i-ii-iii-iv-v wave A, a wave B rebound followed by a i-ii-iii-iv-v wave C. Next is a three waves rebound wave X followed by an A-B-C that ended on 9th March 2009. Since Dow and Nasdaq wave pattern have to be the same from a mega perspective, I shall adopt the same A-B-C-X-A-B-C count for Dow as shown below. This alternative way of counting takes care of the three waves down before reaching the 6547 March bottom and there is no missing wave that I have mentioned previously
If this A-B-C-X-A-B-C is acceptable as it does not violate any of the Elliott's Wave Pronciples, the wave formation after the March 9's bottom has narrowed our previous development of options to only 'option 2' as shown below.
In option 2 as shown above, we have a "leading diaogonal" wedge formation to form wave i followed by wave ii-iii-iv and v to complete 'wave 1' which is another higher degree "leading diagonal" wedge formation as shown above. Currently the Dow is forming a-b-c-d-e corrective wave 2, it has completed a-d-c and currently on mini wave d. The next down will be mini wave e. If Dow started to break out from here next week and move higher, then that will be the Wave 3 that can reach 10,000 (1.618x wave 1). If Dow needs to consolidate for a longer period, wave 2 can take a more complex form instead of the simple a-b-c-d-e then the consolidation period will be lengthened by another 7 to 10 days. By this stage of Dow's chart form, the bullish 'Option 1' that I have ruled out not many days ago has returned as shown below.
After the bottom on March 9, Dow formed a "leading diagonal" wedge formation wave 1 as show above. A two days pullback wave 2, followed by another "leading diagonal" wedge sub-wave i and a one day pullback sub-wave ii. Two consecutive "leading diagonals" is a very bullish formation. After the sub-wave ii pullback, there was a one day rebound followed by another small one day pullback (-83 points) on Wednesday and a up candlestick (+71 points) on Thursday and another longer up candlestick (+119) on Friday, next Monday if Dow can break away, it will be a condlestick of more than 250 points. It has to be that powerful because we have two "leading diagonals" and a 1-2, i-ii and 1-dot 2-dot situation, very bullish indeed. The negetive signs are the technical indicators that have been hovering at the upper ends for quite sometimes indicating overbought situation. But as I have said before, in extream market conditions at market top and market bottom indicators have the tendency to remain at the to or bottom for a much much longer period. The moment the indicators hit the top and if one started to sell his stocks, he could have been out of the market two weeks ago and we know how the market has moved in the last two weeks and all the technical indicators have been hovering at the top for the last two weeks.
After the bottom on March 9, Dow formed a "leading diagonal" wedge formation wave 1 as show above. A two days pullback wave 2, followed by another "leading diagonal" wedge sub-wave i and a one day pullback sub-wave ii. Two consecutive "leading diagonals" is a very bullish formation. After the sub-wave ii pullback, there was a one day rebound followed by another small one day pullback (-83 points) on Wednesday and a up candlestick (+71 points) on Thursday and another longer up candlestick (+119) on Friday, next Monday if Dow can break away, it will be a condlestick of more than 250 points. It has to be that powerful because we have two "leading diagonals" and a 1-2, i-ii and 1-dot 2-dot situation, very bullish indeed. The negetive signs are the technical indicators that have been hovering at the upper ends for quite sometimes indicating overbought situation. But as I have said before, in extream market conditions at market top and market bottom indicators have the tendency to remain at the to or bottom for a much much longer period. The moment the indicators hit the top and if one started to sell his stocks, he could have been out of the market two weeks ago and we know how the market has moved in the last two weeks and all the technical indicators have been hovering at the top for the last two weeks.
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