The main problem with this relatively strong thesis, perhaps the strongest technically, is that when a pattern completes, it is usually followed by a strong counter move, especially, when it completes at the juncture of an additional strong support level like the bottom of a trend channel (daily chart). We got a bounce, but it immediately sold off. I suppose there is an argument that the pattern completed Friday before the close and that put a damper on things. But it wasn’t just Friday. The tenor of this sell off that started on Wednesday bothered me a lot. All the rallies were sold hard. Look at the volume on Friday relative to the past few weeks. It was very high, and closed near the low.

The second zigzag option would complete where I have the 3 labeled at the 1.618 retracement level. The problem with this option is that it breaks the bottom channel trend line. In other words, if we can’t make a stand right here, right now with the first zigzag option, selling will increase momentum on the break of the channel, and then it will be sold again when price action returns to the bottom of the channel. This script follows the pattern I have completed on the 60 minute chart and suggests that we would continue down to complete a motive or impulse wave at a higher level of degree.

Another non-EWP indicator is the RSI on the daily chart. The level where I drew the blue line is 45.50. If you follow the line back you will notice a tendency for the RSI to either find support or resistance at this level. I have noticed this going back to June of 2007. Most securities/indices tend to manifest this tendency with the RSI at a unique level. The levels change over time, but when you find one that has been persistent for awhile, it is useful as a confirming indicator. We are not there yet as a support level, and, a break of this level would also be telling.

60 Minute Chart

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Daily Chart

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5 Minute Chart

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In summary, it's do or die time. If we can muster a strong rally to counteract the end of last week and bounce hard off this important support level, we can likely see 1327 in the DOW, a 1:1 ratio of the move from A to B on the daily chart. If we can’t bounce right here, right now, and we slip under the channel trend line, we will probably complete the pattern I have outlined on the 60 minute chart. A motive or impulse wave down at one higher level of degree. If this occurs, you can expect more downside to follow a three wave bounce. A completed five wave pattern is always the start of something bigger except when it is part of a corrective flat.

In conclusion, pseudoscience can become science. Continental drift was once considered pseudoscience.

The scientific method is a great and necessary process. It is the basis of our most amazing achievements. Some things take time to pass through the rigors of the scientific method and gain acceptance, and some things never will. That's a good thing.

I believe the Elliott Wave Principle or some variation will pass muster sooner rather than later. 

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