Mikey Likes It!

Hey Mikey. With all apologies to the Life cereal commercial from the 1980's, we noted in the prior post we were not a huge fan of indicators like the RSI, or PPO - which are implying a decline - for counting waves. There are several other factors that currently say, "well if a decline does happen, it may still not be the onset of the bear market". One of those factors is the NYSE Advance/Decline Line ($NYAD). Readers of this blog should look up the cumulative value of the indicator if they are interested, but it has recently reached a new high in the last couple of weeks. I have written several times before that major bear markets have rarely started with such little divergence indicated. With that in mind, we must still allow this count of the extended first wave in Minor A. The count is shown below in the weekly closing chart of the New York Composite Index (NYA).

NY Composite Index - Weekly - Minor A

In the extended first wave count, the third wave is shorter than the first, minute ⓘ. So, as long as the fifth wave, minute ⓥ, stays less than the third wave, this count can be valid. We will note that while the Sep - Nov period brought some level of decline, it was quite meager. It could be, but just doesn't seem like, a Minor B wave that really causes significant market vexations, like, say, a long in time Minor B triangle. So, maybe that decline is just a fourth wave. Cautionary note: while this down wave does not have closing overlap, it does have a tad bit of intraday overlap.

None of this completely discounts what the RSI and PPO are saying. There may be a significant decline ahead soon. Sentiment is still fairly overheated. And, for example, if Minor B should turn out to be a triangle, a three-wave ⓐ wave lower could be the most dramatic of the lot. It's just that this up wave count may not be the final one of the bunch. Perhaps a Minor B wave will provide the necessary $NYAD deterioration to create a significant divergence.

So, we remain flexible, calm and patient going into the New Year. We remain on notice for significant declines, and nothing to the downside will surprise us. If a triangle does occur, it might turn out to be a great range-trading opportunity. We shall see.

This is the second post since Wednesday. Have an excellent rest of the weekend and start to the New Year.

TraderJoe