Without further follow through to the downside yesterday I must question the underlying premises of my technical view. That view is that the market requires one more new low (below 666) before a potentially large multi-month rally can unfold in equities. To get that new low the roadmap being followed was that the current upward correction is an Elliott Wave iv’ which would be followed by wave v’ down to below 666.
It is crucial to my methodology that the current rally not exceeds the January 28 high of 877.86. If it did the overall view that a new low is required would be called into question. The roadmap that we are currently in a wave iv’ counter-trend rally would be blown out of the water if the January 21 low of 804.30 is broken. There is one scenario that would keep the overall view in tact but would require a change to the roadmap (Elliott count) on how we get there.
If wave iv’ overlaps wave i’ at 804.30 but doesn’t exceed 877.86, I would have to believe that the swings from the January 6 high are not waves i’-ii’-iii’ of an impulse but rather waves a’-b’-c’ of a complete Zigzag pattern.
I’ll explore that idea further if a break of 804.30 occurs or is imminent.
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