Continuing the thought process

Although I presented a “guest” wave count on Thursday doesn’t mean I agree with it. I do believe that we have most likely concluded a full 1-2-3 (or a-b-c) up from the October 2002 low, but in the manner discussed in posts on January 6 and 7. The question remains whether we are now in a fourth wave or have started a “C” wave decline.

The weakness shown this week has me now leaning towards the scenario that a full a-b-c Zigzag pattern was completed at the October high. This means that the entire move up from the October 2002 low was corrective and part of a larger corrective structure from the 2000 high. This is illustrated in today’s chart.

If we are now in a “(C)” wave from the 2000 high there are only three Elliott wave patterns possible to explain the price movement: An expanded flat, contracting triangle or expanding triangle. Perhaps of some import is what I wrote back in early November in my review of the October 2007 monthly chart: “Most likely the rally from the late 2002 low will be confirmed complete if we break the trendline joining the August 2004 and August 2007 lows. That trendline (slope of 8.608 per month) stands at 1396.4 this month. Another important trendline (slope of 2.48 per week) in my work joins the June 16, 2006 low and the August 17, 2007 low. It stands at 1397.91 right now.”

We have now broken both of these trendlines and are challenging the more forgiving trendline (shown in today’s chart) from the August 2004 low to the June 2006 low. A break of that trendline and the August 2007 low (1370.6) would raise the odds considerably that the move from the 2002 low is in fact a zigzag pattern.

Let's see if 1370.6 can hold.