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I'll admit to accepting the Elliott wave "running correction" scenario
whenever the market sets up the possibility for me. I do like them in the
correct conditions.
I find running corrections happen quite often, and in all degrees or time
frames. For those interested, a running correction occurs in a strong
directional market where wave C of an ABC finishes above the level of A. The
underlying market is so strong, or the larger degree waves are so strong that
a smaller corrective wave comprising part of the larger move is unable to
fight the trend. So, even the corrective waves within the smaller degree waves
cannot go counter to the larger trend.
A good clue this is happening in an impulse move is when the 0 - 2 trendline
is violated. A trendline from the start of a move to the wave 2 bottom, should
not be broken by wave 3. If it is, then either your labeling is incorrect,
wave 2 has not completed, or wave 3 has completed and wave 4 breaks the
trendline. Breaking of the 0 - 2 trendline by wave 4 is the natural
progression with correct labeling.
If the 0-2 trendline breaks before you reach a level where you'd expect a wave
3 to end, whether it be the correct strength, the correct sub-wave division,
whatever, there is a good chance that the entire move up that you had thought
should have developed into a wave 3, is actually still wave 2, moving in the
same direction as wave 1. Remember, wave 2 in a counter trend move, and it is
the inherent weakness of the move that will break that 0 - 2 trendline.
Now, as relates to the present condition. Let's, say the move up from 10/8
starts an impulse move, wave 1. The 0 - 2 trendline runs from 10/8 to 10/14.
That trendline on the Spx and Dow has been breached. So the question becomes,
is the move from 10/14 to 10/20 wave 3? After all the 0-2 trendline was
breached, so if we're in wave 4 now, 10/14 to 10/20 must be wave 3 of this
move up from 10/8. Although short term data might allow you to argue there is
a 5 wave move there as wave 3, it is somewhat questionable. What is apparent
though is that the move from 10/8 to 10/12 (wave 1) is identical in price
length to this suspected wave 3 (10/14 - 10/20). Finding wave 1 and wave 3
identical in length is rare in an impulse move, so the possibility now arises
that the move from 10/12 to the present is all wave 2, or that the entire move
from 10/8 to 10/20 is corrective. It may be entirely corrective, but that's a
pretty powerful corrective move, even for me.
The thrust up will come only when the entire running correction completes, and
will be very powerful.
A wave 2 running correction still has the basic three wave composition. In
this case the first part would be 10/12 to 10/14, the second 10/14 to 10/20,
and we're waiting for the final corrective wave from 10/20 to complete.
Another factor that seem to occur with regularity is the similarity of the
wave length of wave 1 as it relates to the ending point of the entire running
correction. Most often the ending point is the length of wave 1 multiplied by
1.618. This is very common actually, and to apply it to the present situation,
1.618 of the length of wave 1 comes in at Spx 1068. We're obviously flirting
with this level now. If we can confirm the completion of the small sideways
move from 10/20, and we start to thrust up, I'd be expecting a continued moved
to new yearly highs in short order
Is this a sure thing? No. Is this a possibility? It is in my mind, and
although I'm sitting on my hands at the moment waiting for this 62%
retracement of the July drop to resolve, if we can penetrate a little to the
upside on completion, I will expect that move to gather speed on the way up. I
do have a "pivot" period at the end of this month, and the past few pivots
have worked out very well. We'll see.
Cheers,
Peter
http://tiger.golden.net/laird/Comment.htm
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