Roadmap for the Next Few Months

At this juncture I believe that the cash S&P500 will be in rally mode at least until the Autumnal Equinox and possibly until Thanksgiving Day (late November). This means that until that time the index will be making higher highs and higher lows as defined by the Level 3 Price Pulse. The Alpha pulse has been underway since the July 8 low. The next pulse in the sequence, Beta, should make low by September 2 and the Delta pulse to follow should make high between the equinox and the end of October. At that point we should be in position to determine whether the entire rally from March is over or whether it will extend further with a Level 3 Y pulse.

Using TD D-Wave (Tom DeMark’s mechanical version of Elliott Wave) on a yearly chart of the Dow Jones Industrial Average from the 1932 low yields the following count: Wave 1 high in January 1973 at 1067.20; Wave 2 low in December 1974 at 570.00. The Wave 3 high has yet to be confirmed. On the cash S&P500 chart we would need to close a calendar year below 879.82 to show that the all time high of 1576.09 was the Wave 3 high. I do expect this to happen by 2010.

Dropping down in time to the Quarterly chart, TD D-Wave shows that since the 1974 low we have had a complete five wave sequence. Wave 1 ended at the 1976 high; Wave 2 at the 1980 low; Wave 3 at the 2000 high; Wave 4 at the 2002 low and Wave 5 at the 2007 high. This help explains the deep bear market since then.

On the monthly chart TD D-Wave shows that wave A down from the 2007 high ended at the March 2009 low of 666.79. At this point we will not have confirmation that wave B up is complete unless we have a monthly close below 735.09. Again, this is most likely to occur in 2010.

Continuing downwards in time, the weekly chart of the cash S&P500 shows that wave A up from the March 2009 low ended at the June high of 956.23. We just got confirmation that wave B ended at the 869.32 low of July 8 this week. This means that wave C up from the March low is underway now. I believe that this wave C up will end with the previously mentioned Level 3 Delta or Y pulse.

On the daily chart I expect the TD D-wave to show either an A-B-C or 1-2-3-4-5 pattern up from the July 8 low. Again, this wave sequence should conclude the rally from the March low. How will this sequence unfold? My current road map for the next few months is shown, the red boxes being the target time and prices for the Level 3 price pulses.

Let's see what unfolds. I will adjust as market conditions warrant.