Developing the wave count from the October 2007 high - Part III

Since time is most important the first thing I want to do is find a time relationship between the first two waves since the October 2007 high. I start with the first two CITs on the chart presented yesterday. The time (in trading days) from the October 11 high to the November 26 low is 32 days. From that low to the December 11 high is 11 days. 11/32 = 34.4%. Since I require a relationship to be within 2% of a Fibonacci ratio this is not a valid relationship. 36.2 – 40.2 would have worked but not 34.4.

Since wave patterns can end either before or after a CIT (usually by only one fractal) I next look at the move from the November 26 low to the December 26 high. That is 22 days. 22/32 = 68.8%. Again, this relationship fails. Fibonacci is the key. These results indicate that the first wave down from the October 11, 2007 high ended before the price low of November 26.
Measuring time from the October 11 high to the November 12 price fractal low produces 22 days. From the November 12 low to the December 11 price CIT high is 21 days. 21/22 = 95.5%. This fits as I use 94.1 as a Fibonacci percentage. Next I look for confirmation of this pattern in price. The move from the October 11 high to the November 12 low was 137.56 points. From that low to the December 11 high was 85.04 points. 85.04/137.56 = 61.8%. It doesn’t get better than that!

The above calculations lead to the wave count presented today. As you can see, I am counting the action as an a-b-c Flat pattern where the b wave was itself an Expanded Flat. From the December 11 high the “c” wave has been developing into its own five wave impulse pattern. I talked about possibly taking a long position in SPY yesterday since wave v’ of c will be the last wave of the larger Flat. That trade never came off as Wednesday’s low was violated before Wednesday’s high.

For today, I can tell you that I have the proper time and price relationships where the entire flat from the October 2007 high may have completed yesterday. For trading purposes I will go long the SPY if we break yesterday’s high (without breaking yesterday’s low); or, we open in the lower 1/3 of today’s range and close in the upper 1/3 of the range. In both instances I would like to see a daily chart technical “buy” signal which would be divergence between the RSI and Composite indicators.