Update

I am busy in the next 10 days so no posts this weekend and the next one.


The indexes moved higher as expected, but now the move lower from early November is confirmed corrective only three waves which opens the door for different combinations. To add more to the confusion the move higher so far is three waves too, Russel2000 looks more like impulse lower and correction higher and the DAX looks like huge impulse from the bottom in September which is finishing and correction should be expected.

Intermediate term I can not see very bearish scenario which is expected given the bullish cycle and seasonality.... and reversals does not start with corrective moves. Below are two charts with all possible scenarios which I can see at the moment.
- The "bullish" scenario - simple impulse or ending diagonal. It looks simple and the obvious choice.... I saw it already on many blogs. Such an impulse will finish wave 3(or even 5) or C from the bottom in 2009. If you are a bull you do not want to see this "bullish" scenario because you can argue that there is a finished pattern and the bull market is over. You want to see the indexes to continue with the corrective mess and when it is over we can say without doubt we have a corrective pattern running for 1,5-2 years the 7 year cycle has bottomed and this is definitely wave 4 with more to the upside in the next years.
- The "bearish" scenario - we have zig-zags up and down and this is either expanded flat or triangle. This patterns look "exotic" compared with simple impulse higher. On the other side if you remember the long term cycle charts, which I have posted, one of the scenarios was 7,5 long cycle with expanded flat/triangle and if we want to see a synchronization with Europe/DAX we should expect move lower and than higher. So in the end maybe this idea is not so exotic...

The impulse looks obvious, but I think the expanded flat is the pattern which will fit perfect.... not so important because eventually all patterns should make higher high around 2160-2180 (exceptions is triangle, but I think it has very low probability). The important implications are for the long term pattern.



The bullish scenario impulse or ending diagonal. The price should move above resistance 2090 and continue higher if this is what is going on.
You can argue where to place wave 1 and which pattern is running, but it does not matter at all, the outcome is exactly the same.... ok the high 20 points higher or lower, but it is the same for me.

If the price could not rally above 2090 the move higher will be only three waves and than the possible patterns are expanded flat(green) and triangle.
If we see another zig-zag lower with the same size the price will hit support and 50% Fibo retracement at 1990. This should finish wave B probably from expanded flat alternation is the move to continue lower which should be wave C of a triangle.