Assumption: Wave 5 of an impulse pattern that began on 9/10/07 will complete around October 10. Speculating on the future, the question revolves around how this impulse pattern fits into the larger Elliott Wave structure. My preferred view is that it is a “c” wave within an “a-b-c” zigzag pattern from the August 2007 low (scenario 1). The other alternative is that it is a “3” as part of a still unfolding “1-2-3-4-5” from the August low (scenario 2).
In either event the next wave will be down. It will either start a new Elliott pattern or be wave "4" in an impulse. The former allows for a much greater price decline while in the latter; scenario 2, the next wave (“4”) should not overlap the wave 1 high of 1479.40.
Next let’s look at the new monthly chart and see what, if any, light it can shed on the subject. The September price bar on this chart is classified as “uptrending”. The last technical signal on this chart was a “sell” registered at the end of June when the cash s&p500 closed at 1503.35. This signal was a month early as it turns out but did its job. I don’t take action based on the monthly signals, they are just warnings. Like the weekly chart, there has been a positive reversal signal generated in the RSI (at the end of August at s&p 1473.99). This reversal calculates to a target (minimum) of 1579.07. This value supports the idea that a larger impulse wave is developing from the August low (scenario 2 from my last posting). On the Quarterly chart, the new price bar is an “outside” with a higher close. This chart is bullish for now and also supports scenario 2. The longer-term charts show reason to be more bullish over the coming weeks than I have been previously.
However, all of the charts are in a situation where the current move up is setting up sell signals. Look at the monthly chart. Price is ever so close to setting a new high while the RSI lags badly. The same can be said for the weekly chart.
My bottom line: Before turning bullish (I am not a day trader but a longer term position trader)I will wait to see how the expected decline unfolds after the current impulse plays out (wave 5 in the “b of 4” wave count described last time).
The question now is whether the five wave impulse from the September 10 low is complete. Note that we have hesitated in the Fibonacci cluster area of 1542-1549 and that yesterday's downtrending bar has created a price fractal at Monday's high.
