Tuesday, July 31, 2012

On The Edge

This is an update to the previous post regarding the latest developments involving the rally off the June 4, 2012 low point. The rally is very close to completion with likely a few more trading days to go before Minute wave [iii] of Minor wave C down (May 2012 - June 2013) commences. The DJIA is back above 13,000 and the S&P 500 is nearing 1400. Exuberant optimism is one again evident with virtually everyone calling for new highs especially after the ECB President Mario Draghi vowed to do "whatever it takes" to support the euro currency last Thursday. In addition, virtually everyone in Wall Street is looking for the Federal Reserve to launch QE3 and the ECB to launch yet another round of quantitative easing in the very near future. The exuberant optimism and bullishness will not translate into new recovery highs as the bullish sentiment is very consistent with the character of a bearish wave 2 in a larger decline.

Here is an updated chart of Minute wave [ii] of Minor wave C down. The complex structure is very close to completion as the chart indicates:

The structure unfolded as a complex structure (zigzag - double zigzag - flat) with the last part of the flat (Subminuette wave c of Minuette wave (y)) in progress. Notice that the market is struggling to hold the upper light green channel line shown in the chart as support after reaching the trend line. On the longer term, the market continues its struggle to stay above the lower blue trend channel lines associated with Minor wave B up (Oct 2011 - May 2012) -- the trend lines continue to be important and a decisive failure to hold the lower blue trend lines shown in the chart as support would be very bearish as well.

The markets are on the edge of a massive waterfall decline that should start unfolding in early August 2012 with the center of Minor wave C down to be reached around September 19, 2012 and the end of Minute wave [iii] of Minor wave C down to be reached sometime in early October 2012.

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