In my Medium Term Update a few days ago, I outlined a scenario that would put the market in wave 5 from 1267. While that scenario is still a possibility, the more likely scenario remains that the market is currently in wave 3. The wave structure at the moment pretty clearly points to this wave terminating around 1397, very near the 1393 target I have had for this wave. I will attempt to explain in detail my analysis of the wave structure from the 1266.74 low to the present. I will also elaborate on what I expect from here, both for the short term, and for the longer term, including my expectations for waves 4, and 5.
Since it is still a possibility, I will begin with a recap of the first scenario, in which this would be wave 5. Wave 1 took the market from the 1266.74 low, to 1335.52. This wave broke down into 5 sub-waves, 1266.74-1280.11-1272.78-1296.34-1294.96-1335.52. These waves yielded a model value of .9929. Using these sub-waves, I was also able to project wave 3 to occur at 1393, or 1475.
Wave 2 of this sequence turned out to be a complex semi-inverted corrective wave, which eventually terminated at 1309.27. This wave can also be broken down into 5 sub-waves, 1306.62-1363.46-1324.41-1337.82-1309.27, with a model value of .9959. Wave 3 followed, as the market moved to 1320.29-1310.30-1334.40-1313.29-1374.81. This sequence gives a model value of .9999. With this being wave 3 I expected this wave to carry to my wave 3 projection of 1393. Although 1375 has this within my model’s parameters for wave 3, I had expected it to carry closer to the 1393 projection. Wave 4 followed, breaking down into a 1346.65-1361.54-1336.27-1344.26-1325.41 sequence, giving a model value of .9961. These two waves will become important later as I discuss my scenario having the market currently in wave 3. Given the structure outlined above, wave 5 would be expected to terminate at 1383-1384.
Usually at termination points of waves, projections start converging into a very narrow range. At this point, I have yet to see that with this scenario. Although this scenario is possible I see it as a low probability scenario at the moment. The preferred scenario still has the current move as wave3 from 1267, with that wave possibly nearing an end.
In this scenario, waves 1, and 2 remain the same. The difference in the two scenarios involves the next set of waves, which I have numbered as 3, and 4 above. This scenario would have this set of waves as wave 1 of 3 at 1320.29, followed by a complex inverted wave 2 with the structure 1310.30-1334.40-1313.29-1374.81-1325.41. This wave configuration has a model value of .9959.
So, for this scenario the count would be wave 1 at 1335.52, wave 2 at 1309.27, wave 1 of 3 at 1320.29, and wave 2 of 3 at 1325.41. The market then completed a 5 wave sequence from 1325.41 to 1361.32, with sub-waves 1338.42-1334.36-1347.63-1345.26-1361.32, and has a model value of .9925. This would appear to be wave 3 of 3, with wave 4 of 5 completing at 1345.07.
Wave 5 appears to be forming a rather extended 5 wave sequence, with waves 1, and 2 completed. Wave 1 of 5 sub-divided into 1354.82-1354.05-1359.04-1357.62-1360.78, giving a model value of .9999. Wave 2 was another complex inverted corrective wave, similar in structure to the wave 2 from1320.29 to 1325.41. This wave broke down 1358.33-1365.36-1358.96-1380.39-1362.19 from 1360.78. This sequence gives a model value of .9948.
As I mentioned earlier, at this point, I would expect projections to be converging into a narrow range. Given this scenario, that is exactly what is happening.
Wave 1 Sub-waves: 1280.11-1272.78-1296.34-1294.96-1335.52
Optimal Projection: 1393
Wave 3 Partial Waves: 1320.29-1325.41-1361.32-1345.07
Projected Wave 5: 1397-1434
Wave 3 of 3 Sub-waves: 1338.42-1334.36-1347.63-1345.26-1361.32
Projected Wave 5: 1386-1412
Furthermore, the sub-wave sequence of wave 1 of 5 of 3, projects a level of around 1382 for wave 3. A small correction from that point, near 1371-1379, would project wave 5 at 1397.
To summarize the above discussion, I would expect a move higher, near 1382 from Friday’s 1362 low. After a small pullback to 1371-1379, I would expect the market to move up to 1397-1412. This would complete a 5 wave sequence from 1309.27, and wave 3 from 1267.
My projections for wave 5 from 1267 remain either 1426, or 1497. If the market completes wave 3 at 1397 as expected, a small pullback for wave 4 would point to the 1497 target. A somewhat larger corrective, to around 1365, would point to 1426.
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