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It appears that the 4th wave upward is getting complete. We are in
the c-wave of an a-b-c flat correction. As mentioned earlier, the
61.8% retracement level of the entended 3rd wave is 8186. The market
should not normally go above this level. The exceptions are as
under:
1. As you now know a c-wave is always a 1-2-3-4-5 (except the c-wave
of a triangle). Now the c-wave of the 4th wave (a-b-c) started at
7711 and it's movement upward should be a 1-2-3-4-5. It is
possible that the 3rd wave of this 1-2-3-4-5 goes a little above
the level of 8186. Subsequently, the 4th wave of this 1-2-3-4-5
will then correct substantially downward and the 5th wave of
this 1-2-3-4-5 will then move upwards BUT TERMINATE WITHOUT
CROSSING THE 8186 LEVEL. This c-wave (1-2-3-4-5) will then be
called a 5th failure and the termination point of the 5th wave is
where the entire movement ended (and not the higher top of the 3rd
wave).
2. It is also possible that the 4th wave terminates slightly above
the 61.8% retracement level (i.e. 8186). Let us say max 65%. This
will bring the target to say approx 8225. But the significance of
the 4th wave retracing a little more than 61.8% of the 3rd wave is
THAT THE 5TH WAVE WILL FAIL. This means that if my overall
analysis is correct and the 4th wave indeed does terminate a little
over 8186, THE MARKET WILL NOT BREAK THE 7400 LEVEL. As you know,
we now have to revise our target of 7320 because that target was
arrived at presuming that the 4th wave ended at 8106. Since it's
top yesterday was 8160 (54 points over previous top), we will add
the 54 points to 7320 to arrive at 7374. If the market goes a
little more up, we again revise upward.
I already told you that I am taking the entire movement
downwards from 9367 as a 1-2-3-4-5 (C) wave with a "running double
three" as the 2nd wave. Before trading starts, check the daily
chart of the Dow carefully. Identify the 2nd wave zone (I think the
lowest point of the 2nd wave is somewhere in the 8300 range). IF THE
MARKET EVER GOES BEYOND THIS POINT, MY ENTIRE ANALYSIS IS WRONG. THE
4TH WAVE MUST NEVER FALL INTO THE TERRITORY OF THE 2ND WAVE IN A
5-WAVE COUNT. Hence by default the fall from 9367 is corrective and
not impulsive as I'm reading it. WRITE THE LOWEST LEVEL OF THE 2ND
WAVE AND STICK IT IN FRONT OF YOUR TRADING SCREEN.
My trading strategy would be to build a short position and book losses
if the market goes into the 2nd wave zone. If my reading is right I
would only book profits at the 7500 level.
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