A Change In Trend (CIT)

The move higher in the cash S&P500 Wednesday pushed the Swing Index (created by Welles Wilder and represented in conjunction with price on this blog by the blue “swing lines” on the chart) above the last swing high of March 4. This price activity has created a Change-In-Trend (CIT) in price at the 666.79 low and is represented on the chart by the green ellipse.

Price CITs are important because they help solidify where Elliott Wave patterns have completed. The fact that this CIT has occurred in conjunction with a move above the most recent Price Reaction Point high means that I can have high confidence (hence the blue wave label color) that the March 6 low was wave v” of a complete trending impulse pattern from the February 9, 2009 high.

This complete Elliott pattern must be placed within the context of the larger market structure. Trending Impulse patterns can form within waves 1, 3, and 5 of a larger impulse or waves A (in a Zigzag) and C (Zigzag and Flat) of a larger Corrective Pattern. In this case I believe it was wave iii’ of a larger impulse from the January 6, 2009 high.

My next analytical step is to create targets for the next wave in the sequence, wave iv’. The first step in the process is to create Fibonacci price targets. They are shown on the chart as dashed horizontal lines. Note that we have hesitated at the cluster from 732-733. The next cluster is at 773. Wave iv’ should not go above 804.3 (the price area of wave i’). I will discuss my second step in setting wave iv’ targets tomorrow.