Weekly Dow Wave Structure
Stepping back and looking at the bigger picture, there is a wave count that suggests that this move down may have one more push down before we get a respite in the form of a sustained, tradeable relief rally to the upside - but the month of December may be a friendly one to the bulls.
I am using what I think are the correct Elliott Wave counts that have unfolded during this decline on the weekly Dow chart below. Notice that we have waves 1-3 complete in the larger degree impulsive trend, with wave 3 (from May 23 to November 21) unfolding into 5 waves itself. It appears that the November 21 "60 minute rally" that was supposedly kicked off because of Obama's choice for Treasury Secretary may have indeed been the wave 3 bottom.
If this count is correct and if this is a wave 4 advance, where will it go? There are upside measurements that take it into the 9600 - 10900 range. I know that is a broad range, but the absolute farthest this move higher would be able to go is 10900 without violating the wave pattern. If the wave 4 correction gets up into the range of the wave 1 decline (the October 2007 - January 2008 decline) then this downtrend would be considered pretty much over.
That kind of rally would have to make it through some pretty stiff resistance to get there, though. Notice the parallel channel lines that I have drawn creating two distinct downtrending channels on the chart. Right now the center green line would be primary resistance as this has been a downright brutal decline. Also notice the two vertical lines (one red, one blue) coming down the chart at the end of December and early January. Those are 24 and 64 week cycle lines that are coming into play very close to each other, which means that whichever way prices are trending into this time frame, a reversal of some magnitude is likely. So if a rally unfolds into this time frame, (essentially through the month of December), we can expect a reversal in that time frame. Whenever two or more cycles of different degrees fall in close proximity of each other, they can have a powerful influence on price swings or reversals. In this case since the overall trend is down, a rally into that time frame should see a reversal lower.
Since Elliott Wave is more of a road map than a predictor, there is no guarantee that this scenario will unfold. With the waves unfolding in these identifiable patterns, though, the odds of the scenario I have laid out are good. If this rally does not materialize, however, and the recent lows give way - look for support in the 6500 area on the Dow. If a wave 4 rally unfolds as predicted, that will allow for more accurate projections of an expected wave 5 bottom for some time next spring.
Below is the Dow chart with my wave counts and projected wave 4 termination area:
I am using what I think are the correct Elliott Wave counts that have unfolded during this decline on the weekly Dow chart below. Notice that we have waves 1-3 complete in the larger degree impulsive trend, with wave 3 (from May 23 to November 21) unfolding into 5 waves itself. It appears that the November 21 "60 minute rally" that was supposedly kicked off because of Obama's choice for Treasury Secretary may have indeed been the wave 3 bottom.
If this count is correct and if this is a wave 4 advance, where will it go? There are upside measurements that take it into the 9600 - 10900 range. I know that is a broad range, but the absolute farthest this move higher would be able to go is 10900 without violating the wave pattern. If the wave 4 correction gets up into the range of the wave 1 decline (the October 2007 - January 2008 decline) then this downtrend would be considered pretty much over.
That kind of rally would have to make it through some pretty stiff resistance to get there, though. Notice the parallel channel lines that I have drawn creating two distinct downtrending channels on the chart. Right now the center green line would be primary resistance as this has been a downright brutal decline. Also notice the two vertical lines (one red, one blue) coming down the chart at the end of December and early January. Those are 24 and 64 week cycle lines that are coming into play very close to each other, which means that whichever way prices are trending into this time frame, a reversal of some magnitude is likely. So if a rally unfolds into this time frame, (essentially through the month of December), we can expect a reversal in that time frame. Whenever two or more cycles of different degrees fall in close proximity of each other, they can have a powerful influence on price swings or reversals. In this case since the overall trend is down, a rally into that time frame should see a reversal lower.
Since Elliott Wave is more of a road map than a predictor, there is no guarantee that this scenario will unfold. With the waves unfolding in these identifiable patterns, though, the odds of the scenario I have laid out are good. If this rally does not materialize, however, and the recent lows give way - look for support in the 6500 area on the Dow. If a wave 4 rally unfolds as predicted, that will allow for more accurate projections of an expected wave 5 bottom for some time next spring.
Below is the Dow chart with my wave counts and projected wave 4 termination area:
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