Today’s action has prompted me to re-evaluate the Wave structure to accommodate the immense amount of correctiveness going on over the past three weeks.The decline from 2801.90 to 2553.80 took exactly 14 market days, while the rally to today’s high took precisely 6 market days.That kind of precision means that Cyclicality is at work, especially after the January 26 to February 9 decline took 10 market days.
I have been compelled to restructure the decline to take the form of a Leading Diagonal in which all five waves are corrective in form, but impulsive in nature.This is the source of much confusion for the casual investor and expert alike.
In addition, Wave [v] of C is the smallest wave, not allowing it to rise to the 2-year trendline at 2675.00.
How do we know that we are in a Super Cycle Wave (c)?One of the guidelines of being in a larger degree Wave C is that the Wave (2) correction may not exceed the top of Wave 4 of (1).The top of Wave 4 of (1) is 2674.78.For the past 2 weeks I have mentioned that the top of Wave (2) may go to 2675.00.That is the “natural” resistance.However, Wave A of (2) only went to 2672.08.Wave C only went to 2665.45.Since there are five completed Waves in C, the odds are high that this is a “truncated” Wave (2) and not a flat, where it may have ended closer to 2675.00.It also means that the panic decline starts here.
ZeroHedge observes, ““What we’ve got here is a failure to communicate,” appears to be the message from the markets as they trade sideways, with wide-ranges rapidly reverting day after day, unable to decide whether trade-wars will happen, if dips are to be bought, if vol is to be sold, if Trump will be impeached, or if the globally synchronized recovery is gaining strength or flailing.”
All of the Analogs to crashes in 1929, 1987, 2000 and 2008 have failed.The 1990 Nikkei crash analog is stretched to the limit.This has caused a lot of bearish analysts to capitulate.Please remember that Waves and Cycles are fractals.Fractals are self-similar and repetitive, but each repetition is different.So you may see similarities to other panics and crashes, but this Panic Cycle is unique unto itself.