Will the market make a new high before year end ? Will the current bull trend extend into 2007 ? Is the 4 year up-trend over and the top already established ? We will discover these answers in the days and weeks ahead... I would like to share the following weekly chart of the Dow-30 Index for your thoughtful consideration. Based on this chart and the premise of a wolfe-wave pattern, it is my contention that if the upper trend channel line is broken, that is, if the Dow 12,000 level is broken below, a vertical free-fall down through the lower channel line becomes a distinct possibility.
what is a wolf wave? that aside, the current chart pattern is actually quite bad. it can't and should not be above the upper channel...that breakout is bearish.
The Wolfe-Wave pattern is a trend reversal pattern most commonly found in the more basic rising or falling wedge pattern. In an uptrend, you look for a sequence of 3 higher swing highs, also the second swing low (point 4) needs to drop below the Point 1 High. This forms the down trendline connecting points 1 and 4, which is also the downside target of the overall pattern at completion. In this specific instance, the dow has formed a channel instead of a rising wedge, but the 3 higher highs and the point 1 / point 4 relationships were satisfied. The area above the upper channel line at point 5 is referred to as the "sweet spot" for optimal long exit & new short entry. The pattern will rapidly clarify (become clearly established) when the dow breaks down below the upper channel line.
Interestingly, if you look at the leftmost side of the chart, there was a perfect wolfe-wave reversal low that formed during 2004 (between Feb '04 and Feb '05.) 3 lower lows, the point 5 reversal (Oct '04), and the pattern completion high came in exactly at the 1-4 up trendline extension (Dec '05). Also notice the MACD Histogram divergence on the 3 lower lows, a classic signature in this pattern.
I was under the impression that a bearish WW needs a decline followed by upside (bear flag). On the weekly DOW chart there is only upside making WW not applicable. I don't think that is a WW.
romik - I am not understanding where in the 5 wave pattern the bear flag is supposed to form ? In my study of the Wolfe-Wave pattern, I have not encountered any mention of a flag forming or required within the pattern. The basic idea is 3 pushes up, point 5 at or above the upper channel line, and the relationship between points 1 and 4. The final wave 5 push up through the upper channel line is the bull trap. The subsequent break down through the channel line triggers a polar opposite shift in sentiment leading to panic selling.
Wolfe waves and elliott waves go hand-in-hand. If you believe in one you will probably believe in the other. For every wolfe wave you find that works I can find 10 that don't.
market trapped by the big boys until expiry. european markets made new highs today.........coiled spring on Friday to the upside, Monday at the latest. Year End Target zones: ES: 1442 min - 1461 max ER2: 825 min - 837 max probably be achieved on Dec 29th - bonus targets achieved!
I have looked into a WW pattern and basically it does work, but for that you do need either a bull flag or a bear flag, for it to work it has to be perfect.