The Long-Term Bull Market Elliott Wave Count
If this is a primary wave 5 up from the Oct. 2011 lows of primary 4, then we need to be on our toes for a bull market pivot top. If it's primary wave 3 up, then we have much further to stretch.
With Elliott Wave analysis, you have to anticipate, monitor, and then adjust. Most of the time I go with my instinct and then only adjust if it looks like I was way off the tracks. The only time I tend to get way off the tracks is when I read too many opinions, so I’ve shut myself off from reading other’s opinions and below is my gut right now:
I know I have labeled one option as the 1,074 lows being primary wave 2, with primary wave 3 under way since (1,074 to current). However, I have to admit my instincts still tell me that the 1,074 lows may have been primary wave 4, and we are in primary wave 5 up now.
Whether it was 2 or 4 is not super important short term because we would either be in a Primary 3 up or Primary 5 up now, which is bullish either way. However, if it’s a primary 5 up, then it changes the longer-term pictures and also fifth waves can be difficult to assess.
There is another rule that says wave 3 can’t be the shortest of waves 1, 3, and 5 (all up waves). Therefore, if we are in primary 5 up now from the 1074 lows then we can’t rally more than 360 points from the 1074 lows (Wave 3 was 360 points).
So here is the possible count if this is Primary 5 from the March 2009 lows with normal Fibonacci relationships:
666 to 1221- 1
1221-1010- 2 (38% of 1)
1010-1370- 3 (61.8% of 1)
1370-1074- 4 (38% of 1-3)
1074-??? – 5 (normally 50-61% of 1-3)
So if wave 5 can't be longer than wave 3, and let’s say wave 5 is 50% of waves 1-3… that would put a top target at about 1426 on the
S&P 500 index. That would make wave 5 just shorter than wave 3 following the rules and would complete 5 full waves.
So that is what I’m grappling with because if this is a primary wave 5 up from the Oct. 2011 lows of primary 4, then we need to be on our toes for a bull market pivot top. If its primary wave 3 up, then we have much further to stretch.
Right now, the evidence is leaning to this being primary 5 up. Below is my chart and I will keep you updated. The volume, MACD, and other indicators will help point the way.
Note how the volume has been declining on every primary wave rally 1, 3, and 5 so far. Note how the MACD line uptrends on each primary wave rally as it is now…
Click to enlarge
Editor's Note: David Banister is the chief investment strategist and co-founder of ActiveTradingPartners.com, a small-cap portfolio and market advisory service.
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