There are many respectable Elliott Wave analysts that have labeled the move up from the March 2009 low as a triple zig-zag. And depending on the EW analyst, it's either wave 2 or B up in a larger correctional pattern down. And, with this week's sell off, they have the next wave down already beginning.
During this move up, one of the things that has failed to occur was topping patterns forming on individual stocks. For the most part, big cap. stocks were rising into resistance areas, but not display topping patterns, which you would normally expect at a market top, UNLESS:
I was telling a friend 2-3 weeks ago; that the only way this would work as a top is the market itself completing an Elliott Wave count higher, and then the markets falling into a hard roll over.
Above is the daily chart of the DOW. I've put in a very common triple zig zag Elliott Wave count I've seen by many. Note: My wave W is in a slightly different place, that's just my own variant on the count.
If you take a close look at wave Z, we have a clear abc wave pattern, with wave b as a wedge, and wave c as an ending diagonal. Then something really interesting takes hold. The last three days we've had the hard rollover, and specifically, this is a bearish Candlestick pattern.
Three Black Crows Pattern: If there are three declining consecutive black candles, it's called Three Black Crows Pattern. Three black crows presage lower prices if they appear at high price levels or after a mature advance. The three lines should close at or near, their lows. (Page 97, Japanese Candlesticks Charting Techniques, 2nd edition, Steve Nison).
In summary the Risk Chart is for now confirming elevated risk and now is a time to implement risk management and gain protection strategies. The Risk Chart is saying expect a more significant correction in price and/or time than the smaller corrections we've had during this up leg.
The risk chart pointed to greater volatility, and we've got some right now.
One day ago, I wrote for www.safehaven.com, "What Are Some Big Individual Stocks Telling Us: Follow up on IBM". In that, I said:
I would like the reader to keep an eye on IBM, its movements have great influence on the DOW. In addition, a break down at these levels would be a bearish indicator for IBM and thus the over all market.
Like the rest of the market, on Friday, IBM continued to break down and is a warning it's self if it continues downward.
Lastly, the newest pattern unfolding: The Three Black Crows is a negative for the market as it preludes lower prices.
Finally, when we contemplate the possibility of the wave up (triple zig-zag) being complete, and the Risk Chart suggesting higher levels of risk for the longs, IBM's possible roll over, and the Three Black Crows, well maybe, "The Fat Lady Has Begun to Sing".