Counting from the March high, I see a big wave 1 (3 months) big wave 2 (3 months), then about half of wave 3. Counting down from the Sept. highs, I see wave 1 (6 weeks), wave 2 (4 weeks), and we find ourselves in wave 3 of 3 of 3, hence the volume crescendo and beginnings of the use of the term "bear market" by the press. Given the wave 1 = wave 3, it could be the start of a 500 point bounce. However, that count causes waves 2&4 of your wave 3 to overlap, and also pushes this bounce to run into the previous correction, both of which are not likely. That leads me to favor a little more down in 3 of 3 of 3.
So, if this is four of the bigger three, it has to unfold pretty flat to avoid smacking into the last consolidation. Generally wave threes are pretty stretched out - much room between wave two and four.
My favored count, which is pretty hard for me to believe because my gut tells me to get out of the way, is that the drop from COMPX 3500 has been 1-2-1-2-3 and we're in 4. According to strict theory, though, that would mean the rally would have to stall immediately to avoid overlapping 2&4 again.
I don't take it all that literally. I agree with your assessment that it feels like time for a "four", but I'm not sure three was bad enough. Completion of three means that you are closer to the bottom than the top. Emotionally, we've just begun to see the realization take hold that recession is a possibility. This wave down ends with acceptance that the recession is on its way, and I see no acceptance.
Wave five is the one to really watch for - that one ends in capitulation, which any good trader will be able to spot.
BC |
