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The Long-Term Bull Market Elliott Wave Count

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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.

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I have to be honest that I am grappling with a few possible counts since the March 2009 bull market commenced in terms of the big picture.

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…

Stay tuned.


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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