Price Waves #3 - The 2007 to 2009 Decline

In my last post we reviewed the wave count from the 1974 low using Quarterly Chart data. We wound up with an A-B-C count for the price action between the years 2000 and 2009. That A-B-C pattern is either an Expanded Flat or the first three legs of an Expanding Triangle. The difference being that the third leg (down into the 2009 low) would be a five wave impulse in the Expanded Flat scenario but a three wave corrective pattern in the Expanding Triangle. To distinguish which pattern is forming requires price data on a lower time frame. Since the monthly chart does not resolve the data well enough to answer the question I will take a look at the weekly chart.

The above chart shows a clear Zigzag pattern. We must therefore conclude that it is an Expanding Triangle and NOT an Expanded Flat forming in the fourth wave position from the 2000 high. This implies that the subsequent rally from the 2009 low is wave “D” of the triangle and will itself be a corrective wave pattern. I will start to explore that premise next time and introduce a D-Wave modification.