Holiday is Over

After a nice holiday it is time to get back studying technical analysis on the cash S&P500; in particular, improving my understanding of the Elliott Wave Principle. I begin with where I left off. Today’s chart shows my last market map with the price action overlaid. Not good enough.

Since my last posting we did sell off, but more deeply than I anticipated; and it now looks like we will not get a move to higher highs over the next week. Technically this was confirmed at the close of Friday, May 23 when the weekly chart went on a “sell” signal as the Composite Index failed to confirm the RSI. Please note on the daily chart that at this date the daily RSI ran into the resistance level associated with continuing bear markets. Yesterday the daily chart also showed the same RSI/Composite technicals. The RSI made a new high since it lowest closing low on 5/23 but the composite did not confirm (see chart).

This price action has forced me to change the short term wave count to that shown in the chart. I still think the decline from October 2007 until January 2008 was an a-b-c zigzag but now view the action since then; and until the May 2008 high, as an Expanded Flat pattern.

Since my current premise is that the high (from the March low) is not yet in I don’t expect the March low to be broken on the current decline. Furthermore, as my wave count indicates, I suspect the current decline is a “b” wave – which will itself be a corrective pattern. A range bound market between 1260 and 1440 will likely persist deep into the summer. The current decline should; as a minimum, reach 1328.