As I’m certain some of you read in the comments section, there was a death in my family yesterday, so I’m going to need to keep a bit lighter schedule through the remainder of the week. My thanks to those of you who have expressed your condolences and kind thoughts.
Despite the challenges of my personal life, it’s hard for me to simpy abandon “you guys” (my readers, male and female, of course) during what may well prove to be a key turning point in market history, so I have prepared a few charts and a brief update. Two of the charts were completed before I got the bad news yesterday, but I also added an SPX chart because I know readers expect/rely on it more than the other indices.
Keeping things fairly brief, it does appear that the preferred count of the prior week is playing out. There is still the option of another leg up to new highs, but given the strength of yesterday’s sell-off, that now appears much less likely.
The more relevant question appears to be in trying to determine the trend degree of this decline. Both RUT and COMPQ seem to suggest that the recent rally was, in fact, a fourth wave at lesser degree as opposed to a larger second wave. The meandering nature of the recent rally is also suggestive of a fourth wave.
This would suggest that the current decline is the fifth wave of the larger first wave, which should be followed by a decent retracement rally (in wave (ii)), which will probably show more “purpose” than the most recent back and forth retracement rally. Second waves are generally sharper and faster than fourth waves.
To illustrate why I currently view the recent rally as a fourth wave correction, and this as a fifth wave decline, here’s the RUT chart, followed by the Nasdaq Composite.
COMPQ also currently counts best as a fourth wave correction.