Tuesday, June 3, 2014

Ascending Triangle Pattern

I think we finally have something that looks like a "proper" W4 after today's price action. We now have an Ascending Triangle pattern with a target of 1935, which would imply a W5 that is 20 points in length and in line with the proportion to W1 I posted about yesterday. So if the pattern materializes, we should see a rally starting tomorrow and perhaps we'll finally get a decent correction. Whether or not is "the correction", it's impossible to tell. Also, I wanted point something about the monthly chart I posted yesterday. Prior to the 2002 sell off, we had the peak in the markets in 2000 which doesn't show on the charts. And from the 1995-2000 period, the markets had a diverging 70+ monthly RSI that lasted 5 years, so it is fair to say that while the extreme overbought RSI on a monthly time frame have been great predictors in the last 12 years. The period from 1995-2000 was not a good example of this particular signal being a good indicator on its own. However, the key to this system working is the "turn of the trend", and by that I meant a death crossover or the 50/200. At this point, we are obviously far from it but it is good to keep it in mind given the fact of what has happened in the last 12 years. Also, I think the 1995-2000 period was a unique period in the history of humankind as the internet gained mass acceptance in the world during this period. This is a time that will be remembered several hundred years from now, as it is as important as the introduction of the printing press in Europe (which led to the Renaissance and consequently the Industrial Revolution). So the bottom line is, the markets might continue to rally past 2000 but it will need to stop sooner rather than later to consolidate all the gains from the last few years.

For further analysis on the NASDAQ, DJI, RUT, Gold, Silver and Oil please visit http://www.ewaveanalytics.com

Short Term Trend = Bullish
Medium Term Trend = Bullish
Long Term Trend = Bullish

* Trends are not trade signals. Trends are posted for situational awareness only and does not take into account wave counts, technical or fundamental conditions of the market. While mechanically trading the posted trends is feasible, keep in mind that these are lagging indicators and as such are prone to whipsaws and I personally do not use nor recommend them to initiate or close positions in the market without taking into consideration other factors.

Elliott Wave Analytics

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