The larger degree fourth wave decline has proven itself thus far, but a near term bounce is becoming much more likely. I’m currently on the fence as to whether the move into the all time high’s was a wave B of an expanded flat or a thrust up out of a triangle. With either of the scenario’s it still calls for the same degree correction, but the structure that unfolds would be slightly different. If it was a wave B of a flat, then we would be looking at a five wave sequence down from the high’s to complete C of (4). If it was a completion of an impulse into the highs then the current decline wave will take the form of a zigzag most likely. Sifting through the longer term charts I found it rather interesting that all of them seem to point to a particular point. Fourth waves have certain expectations that come with them and one of the ones that has kept me out of trouble in the past is expecting a minimum 23% retracement of the same degree third wave. If you look at the retracement levels of all the index charts below you’ll notice that the previously mentioned percentage sits right at the previous intermediate swing low. That is where I believe this decline has a good chance at terminating.
TRANSPORTS
DOW JONES INDUSTRIALS
NASDAQ COMPOSITE
RUSSELL 2000
S&P 500
NYSE COMPOSITE
Now with that pointed out, I don’t believe for a second that we will get there in a straight line. This is presumed to be a fourth wave and has a reputation for being rather complex. The MMTW initiated a buy activation yesterday by closing below the 30 mark, but that just serves as a heads up that a bottom is getting near. Not until it closes back above the 30 mark on a daily basis is the buy trigger tripped. Also of note is that it was unable to reach the 70 zone and close there to initiate the original sell signal for this decline which would seem to indicate there is more weakness here than meets the eye.
That’s all from the market weather man today, so keep it in your forecast. More down with increasing chances of up.