A Time of Consolidation

The stock market has been in a three month consolidation period that is nearing completion. After the consolidation period is complete, a final push to new bear market rally highs is expected before peaking for the year on June 24, 2012 as the business cycle high point is reached.

Here is a chart of the DJIA:

The DJIA has been tracing out a 3 month expanding triangle, which is identified here as the second x wave of a larger triple zigzag, Minor wave B. Wave B is the complex leg, unfolding as a triple zigzag. Waves A, B, C, and D are complete with wave E of the triangle close to completion. The triangle should be completed on May 15, 2012 with a downside target of 12680. The triangle will be followed by a powerful thrust upwards in three waves that will take the DJIA to the upside target of 13625 by June 24, 2012.

Wave E of the triangle is unfolding as a simple zigzag. The E leg of the triangle contains a smaller triangle as can be seen on a close-up view of the DJIA:

The triangle, Subminuette wave b of Minuette wave (e), has a duration of around 3 days and should be completed late tomorrow (May 10, 2012, around 2 PM New York time). The smaller triangle is also unfolding in the S&P 500 and the Wilshire 5000. The D leg is likely the complex leg (double zigzag) of the smaller triangle.

The triangle count for Minute wave [x] (the second x wave in a triple zigzag) only applies for the DJIA. In the S&P 500 and the Wilshire 5000, Minute wave [x] is unfolding as a double three (expanded flat - triple zigzag -- flat) pattern that will also end in May 15, 2012.

The chart for the S&P 500 illustrates the double three count:

The downside target for the S&P 500 is 1336, reflecting the relationship Subminuette wave c = 1.382 * Subminuette wave a within Minuette wave (y). After the downside target is reached, a powerful thrust to 1452 is expected to follow with the upside target reached on June 24, 2012.

A time of consolidation is in progress with one final push to new bear market rally highs to start on May 15, 2012. Exuberant optimism should go into the stratosphere during the final thrust with the possibility of record bullishness in the picture. The record bullishness could easily take the form of people making very large extrapolation leaps, such as calls for Dow 30,000+ and a lot of talk about the "American Miracle" in the economy from economists and people in the mainstream media.