|SP500 Primary 5 Count (Circle 5)|
I use a relatively specific method of counting the Elliott Wave when it is an Impulse Wave, which I have completely disclosed and provided as a Featured Post entitled, The Eight Fold Path to Counting the Elliott Impulse Wave. Please refer to that section if you have not yet. But in this post I just want to stress a couple of points about why this count is likely correct.
As far as we know, Ralph Nelson Elliott was the first analyst to introduce the concepts of a) parallel channels, and b) alternation into market analysis.
Regarding parallel channels, when you place a line from wave Primary 1 (Circle 1) to Primary 3 (Circle 3), and put a parallel copy on Primary 2 (Circle 2), you find it projects the low of Primary 4 with considerable accuracy. The intra-week low of Primary 4 is outside the channel, the closing low is inside the channel. So, this market count meets Elliott's guideline of parallel channels very well.
But, more than that, the only two waves that span the channel are these two that are labeled Primary wave 2 (Circle-2) and Primary wave 4 (Circle 4). If you try to construct the channel in other ways, you will find it very difficult to come up with a different scheme. So, these termination points are the most logical termination points for waves Primary 2, and Primary 4 using Elliott's technique.
Next, it is pretty clear, that Primary 1 (Circle 1) is a five-wave sequence all by itself, and takes about a year in time. For the small three-waves down in 2010 to be the full correction of Primary 1 seems like "rushing a count". While second waves are 'often' zigzags, they are not required to be. No, in my view it is best seen that Primary 2 (Circle 2) is counted as a relatively rare "running flat" wave, which has three waves down to (A), three-waves up to (B), and five-waves down to (C). All of this makes sense not only in terms of the definition of a FLAT (as a 3 : 3 : 5 sequence), but it also makes sense in two other ways.
First, the running flat takes up much more time that the simple zigzag, and provides a better correction for Primary 1 (Circle 1) because it does. But, second, a "running flat" provides a very key signal that a strong and powerful third wave is about to occur. And that's exactly what this one signals as Primary 3 (Circle 3) goes on to be 1.618 times Primary 1 (Circle 1).
The Primary 3 = 1.618 x Primary 1 is near exact in the Dow Jones Industrial Average, and is slightly beyond in the S&P500 Index. Still, it is the most likely place for a Primary 3 wave to end, and it does.
Next is Elliott's Principle of Alternation. With the "running flat" for Primary wave 2 (Circle 2), we were fully expecting that the middle wave of wave Primary 4 (Circle 4) - whether it was B or X, as we have it labeled - would not make a new high. That is, we were expecting alternation in the waves and this is exactly what happened. The waves that formed Primary 4 (Circle 4) count very well as a double-zigzag and provide the needed alternation.
Now, just from a visual perspective, you can see that Primary 5 (Circle 5) is not yet as long in terms of price as Primary 1 (Circle 1). A very common Elliott Wave relationship is that 5 = 1, so this may yet occur. Second, you can see that Primary 5 is not yet as long in terms of time as Primary 1. So, the bottom line is that we are doing everything possible not to rush the count. It is entirely possible for this wave to last until Jan - Mar, 2017.
By the rules of Elliott Wave analysis, Primary 5 (Circle 5) can form as either an impulse wave or as a diagonal wave. We have our suspicions it is the latter, but we are also keeping tabs on the former. We literally have no preference which forms, but we are seeing signs of weakness and lack of momentum that are worrisome in the market. One of those signs of weakness is that Primary 5 (Circle 5) is finding resistance right along the mid line of the channel - just as Elliott Predicts. We think this ups the odds the Primary 5 (Circle 5) is indeed the wave in progress, as that it is becoming weaker as it travels.
And please remember as we have stated before, because this upward wave is likely the last in a sequence, and the last in a very long sequence since 1932, it would be fully allowable for Intermediate wave (5) of Primary 5 (Circle 5) to fail to make a new high. If the failure occurs, we will try to bring it to your attention.
Again, we make this post because some people right now have three or four different counts working, or are trying to pick tops, or somehow suggest that Primary 3 is in progress, or suggest that Primary 4 was not sufficient as it was. I, on the other-hand, am just trying to keep things simple, stay flexible, and be patient.