Mid Week Update
Bottom Line: The recent price movements we have seen in the US stock markets suggest presently we are right to suspect that it's a 4th wave pull back from the June 2012 lows, although it could get more choppy as 4th waves are known to be nasty waves to count let alone try to trade.
I don't see any price evidence to be bearish on the markets, all I see is a bunch of corrective looking 3 wave moves, so once this suspected 4th wave is finished I am expecting more upside.
Although we do have caution areas below we must respect should the market do something we don't expect, but as of now things are working out nicely so I will maintain the current ideas.
There are still 2 ways we can label this, the triangle is the alternative idea, as we could drop lower to a new low around 1420SPX which is the preferred idea, but on the whole from what I have seen, it fits in well with the idea of a 4th wave pull back.
We are seeing 3 wave movements, so corrective price structure, but it could be a nasty set of waves as 4th waves are known to chop up traders and generally create problems for both bears and bulls.
Target range is 1410-1420SPX for the wxy idea, if the triangle idea is the working pattern, then the low is already in as the wave [a] of the triangle will be the lowest point.
I have not shown the triangle option on the NDX as I tend to think the wxy option is the better wave count as shown, so a new low to around 2750 could be seen, if however the triangle option is the favored pattern I will update as/when I feel it's starting to take control.
Being a suspected 4th wave it's likely to cause a great deal of issues to traders as generally 4th waves are the worst to trade.
There are 2 options, one is a simple wxy correction, so this current move would be a [x] wave, and then drop down towards 1420ES in wave [y], or we could be involved inside a triangle and the low is in place as we have no business under 1423ES.
With the way some markets such as the DAX are set up, the wxy option appears to be the favorite and push to 1420ES; however I will monitor both options.
Resistance at 45ES then 50ES
Support at 36ES then 27ES
If this is a triangle or a complex set of moves, then get ready for some sideways choppy price action.
To read the rest of the report click this link: http://www.wavepatterntraders.com/ElliottNewsletter/shlink.pdf
Until next time,
Have a profitable week ahead.