After a great deal of panic selling we have the necessary price action and volume to say that capitulation has happened to some extent. The chart now takes the form of a simple ABC from our ath of $1100. However we have not been gifted with a clear wave C count, necessarily an impulsive wave in EW analysis, to say with confidence that this move is over. Regardless of the correct count we still have many levels to watch that if broken, and in what manner, can give us clues about the termination of wave C.
one thing that seems clear is that wave i of C is the fall from 680 to 540. If we pass through 540 in the coming days, the possibility of a hypothetical wave v is nullified, buy and hold on tight.
Now here's a possible count that makes sense and looks good until we take into consideration a couple of significant ew guidelines. wave IV tends to resolve within the vicinity of wave (iv) of one lower fractal (440-530). This would be a
deep retracement of wave iii, and must come close to the territory of wave i. This is not a likely wave behaviour because we would expect alternation between the waves ii and iv - deep and shallow and vice versa to that total retracement within the cycle becomes equal to 0.618, the magic number. Also, in the chart above you can see that wave (v) of iii, and similarly wave
v of (v) are larger than wave (iii) of iii and
iii of v. This we could call a wave v blowout but its not something we expect to see with wave iii of (iii) of ((iii)) etc....
how can we tell if this is the correct count? a retracement to 440 and significant weakness in the area. If this is the count, we will have a final v wave down, possibly into the lower 200s. we would not be likely to enter the 100s because the iii wave was so severe, that a diminished v is likely.
Here is another possible count that implies termination of wave c. On first impression, not as practical as the above, but here is why I think it is equally as likely as the above - a) waves ii and iv alternate (deep and shallow) b) wave iii is a practical size, whereas wave iii above is ridiculously big compared to wave i. ideally we want our iii waves to be 1.618 the size of wave i. in this example, that is more or less the case. In the above example, the ratio is 2.6x wave i. In this case we have a blow out wave v. Speaking of a completed wave C, I do not find this surprising because we are really dealing with an exponential subject here. This logic is consitent with the above example because I am referring to wave v of a complete cycle, not the (v) of a wave iii that is over extended and contradicts a v wave blow-out.
The confirmation of this count is more difficult, we will need to see a convincing primary wave form at local levels, or a blast through 540.
There is a third possibility here that demonstrates the same implications of the second count, but also has imperfections.Namely, the wave iv is too small in comparison to the wave ii, and wave (v) of iii does not easily fit an impulsive description.
while counts of hypothetical wave v or iii may not yet be complete,
bottoming out in the next day in the 200s will likely be followed by a rally to at least 450, the lowest probable identifiable wave (iv).
dont let the bear whale get you down.
