Perfect Wave - 2012-1/2

Since the 5 bar drop on Wave "A" (of the bigger Wave 4) began on April 3rd, the SPX has failed to break the 1,357 low on each subsequent retest. Although the overall uptrend is still intact, I see two possible scenarios regarding the recent weakness:

1. The SPX holds 1,370 to rally back over 1,411 (but still does not break the 1,422 highs) and completes wave 5 of "B", before a "C" wave correction starts and lasts through the summer doldrums.

2. The SPX continues to sell off and break 1,357 (Wave "A" low), the chop was all "B", and the confirmed break of 1,357 will define "C".

Either way, there is probably more volatility and chop until the uptrend resumes in Wave 5.

 

If the market bounces hard, here is another possibility.

 

Looks like futures are down big on Europe news/France election results. Wave A low of 1,357 has been breached as of Sunday evening (which was 1352.50 on the futures).

 

It's good that SP futures pulls up a lot before the market opens. We will need to watch to see if the cash index would fall below the starting point of last up waves - the low of 04/23/2012 in order to decide which count is valid.

If 04/23/2012's low is breached, the wave count of 04/28/2012's post becomes valid. Otherwise, last weekend's count is valid.

 

ScalperJoe - Thanks for sharing your thought!

 

Wide Tailz - Nice count! Thanks for sharing.

 

Just so I understand this correctly, as this is very interesting regarding the wave count, if the futures (/ES) breached but SPX did not, which takes precedence in accurately counting the waves?

 

ScalperJoe - Very good point! That is a very good question indeed! We trade wave, which is following some natual law, so we want to trade something that has good liquidity and good volume. The more people participate the market, the more accurate we can get from counting the wave. It is a dilemma whether we should or should not count the wave of after hour's futures market. The after hour's trading is much easier to be manipulated. What I do is to have a 2-way consideration: I count both SPX and futures index. Today's market is an example that the after hour trading penetrated 04/23's low, but in the regular hour the market tried many time without being able to breach that key support. Now I guess that we have two possible counts:
1. ABC has completed the wave [IV], so the market is heading north for [V].
2. Or the market is heading down in a massive wave-III collapse.

 

Ok that makes sense, thanks for the clarification.

 

Looking for a bottom likely sometime today.