Stock Market Potential Wave Counts
Stock-Markets / Stock Markets 2011 Aug 03, 2011 - 01:01 AM GMTBy: Tony_Caldaro
After reviewing the charts this evening we eliminated one of the potential counts we had posted on the DOW charts: a diagonal Primary wave V. Since the market is already in a downtrend, failing to make a new SPX/DOW high, this count is no longer valid.
Another potential count that now has a low probability is the subdividing Primary wave III count, which was also posted on the DOW charts. As a result of these changes we are now able to place more specific probablities on the remaining counts.
We updated the SPX/NAZ charts to the most probable OEW wave counts. The NAZ count remains unchanged, Primary wave V just completed in July, except we updated all the labels with the appropriate colors. The SPX charts have been updated to display one count only, the preferred count: Primary IV ended at the March low, and Primary V at the May high. The downtrend into June we are labeling either Major wave 1 or a, and the recent uptrend Major wave 2 or b. These are both bear market counts.
The remaining two counts: a triangular Primary IV and a subdividing Primary III, are now posted as alternate counts on the DOW charts, with the triangle Primary IV more preferred.
When assigning probabilities to these counts we took into consideration all the factors we have been noting for more than a month. These include; continued weakness in the foreign markets with several already in bear markets. The developed economies Central Bank Currency Swap Program being used to support the Euro. At the end of June it was extended into August 2012. The USD and EUR will likely continue to depreciate against other foreign currencies at the detriment to those economies. Brazil, India, Switzerland and Japan immediately come to mind. Six of our eight longer term technical indicators continuing to display negative divergences at the bull market highs. We also believe any additional Quantitative Easing programs will likely arrive too late to support the bull market. The FED will likely wait until the market corrects about 15% before it considers expanding the monetary base again. By time that occurs we may have an OEW bear market confirmation. Since these medium/long term trend (wave) confirmations typically lag the actual tops and bottoms we try to anticipate them in advance. This is one of those times. The SPX/DOW/NAZ charts have all been updated.
MEDIUM TERM: downtrend
LONG TERM: bear market likely underway
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