I wonder if this last decline was a 4 wave?

Wed, May 25 2016 2:39 PM ET
ELLIOTT WAVE ANALYSIS SUGGESTS THAT STOCKS HAVE BEEN IN A WAVE FOUR CORRECTION -- SINCE BULL MARKETS USUALLY HAVE FIVE WAVES, THAT MEANS THERE'S ANOTHER UPWAVE TO COME -- BOTH VERSIONS OF NYSE ADVANCE-DECLINE LINE LOOK STRONG -- S&P 500 HEADS UP FOR TEST OF OVERHEAD RESISTANCE

By John Murphy

STOCKS ARE ENDING WAVE FOUR CORRECTION... I find Elliott Wave Analysis very helpful in keeping the stock market's trend in proper perspective. I'm revisiting the subject here because I believe it may explain what's happening in global stocks. Here's a brief explanation. Major bull markets take place in five waves. That includes three upwaves (waves 1, 3, and 5) interrupted by two corrective waves (2 and 4). Last July 9 I suggested that the stock market had completed three major upwaves from its 2009 bottom. [See blue numerals in Chart 1]. The message warned that the market was due for "a period of consolidation or correction within its major uptrend" (a wave 4). An August 22 message was headlined: "STOCK HAVE ENTERED WAVE 4 CORRECTION". The good news is that wave fours are usually only an interruption in a longer range uptrend. Blue numeral 1 shows the first upwave ending in early 2011 followed by a wave 2 correction (II). A rising wave 3 (III) lasted from late 2011 to mid-2015. The Wave 4 correction starting last August bottomed in February (IV) . That suggests that stocks are transitioning from a corrective wave 4 into a more positive wave 5. Chart 1 also shows the S&P 500 bouncing off a rising trendline drawn under its 2009/2011 lows.