For those short, I have good news and bad news.
First the good news....off the lows, I can clearly count a corrective pattern forming which is a 3-3-5 flat. Most of today formed the 5 wave up move that is the C wave of this pattern which probably ended on the close today.
Now the bad news....this entire pattern off the lows looks like the B wave of a larger corrective pattern. Off the highs, there is no doubt that the only count is a 3 wave zig zag to the recent low. The smaller corrective pattern, also being 3 waves, gives us the second 3 wave pattern from what I believe is a larger 3-3-5 flat that is correcting the entire move off the Sept lows. There is no other way to look at it right now.
Thus, I suspect that we will get a 5 wave decline starting from the open tomorrow and finishing up sometime Monday which should complete the larger 3-3-5 corrective pattern. From there I suspect we'll get another 5 wave move up to new highs and it could be pretty bullish. In the longer term, I doubt this is the start of a new bull. The state of the economy just doesn't dictate it and valuations are way too extreme with things getting worse in the future. The most likely cause is the cancellation of the 30 year long bond. This eliminates a source of safe investment for many and will end up forcing all this money into another spot....equities. At this point, I think it is obvious that the government is blatantly trying to support the stock market with heavy manipulation and by eliminating the long bond, they created a new tool to literally force the market up. The problem is that the root cause of the market's troubles are not gone and that is the excessive amount of overcapacity that has been created on credit and while much of the excess can be written down, the debts still exist. With the public debt also increasing, lay-offs increasing, and savings well below zero I suspect this will have severe repurcussions going forward at some point in the future.
Thus, I suspect that what we will be facing is the C wave of a larger corrective pattern once this bottoms on Monday. In the short term and using the DOW as a guide, A was 500 points from about 9600 to 9100 so if C = A and B just finished at the close today at 9300, we could be looking at a downside target of about 8800 on the DOW. Coincidentally, this is also about the 50% retrace for the entire move up off the lows.
In the larger perspective, if the move off the lows was an A wave of a corrective pattern of a larger degree, than it was worth about 1540 points. If the downside target of about 8800 is hit and serves as a starting point, than a C wave that is 0.618 of wave A or 950 points, than we have an upside target of about 9750. Coincidentally again, this is very near the low of my proposed wave 1 of a major degree. If wave C is equal to wave A, and 8800 is the starting point, than we have an upside target of about 10,340 on the DOW. Currently I have 10,120 as my ultimate bear stop point. A move over this and our giant C wave turns into wave 3 of a bullish wave, perhaps being wave 5 of a major degree and I suspect we may be looking at a retest of the all time high in the index.
See my site tomorrow morning for charts and details.
www.raptorgroupresearch.com |
