How Long Will It Last?

Sometimes it is difficult to believe yourself even when everything seems to be saying you're right. I have been arguing since the beginning of this rally in March of 2009 that it would last longer and go further than most would think, that it would be a very large x wave that would probably look like a double zigzag and that it would last into June to August of 2010. The pattern of the current correction can be interpreted in multiple ways, but with only a few exceptions, it is rare that significant declines begin from deep second wave retracements from my observations since 2000. The current retracement will most likely be deep and possibly even exceed the January high. This, in my opinion, greatly reduces the likelihood that the current rally is a second wave, which means it is a (B) wave as I have shown above that is now subdividing into a double zigzag. We are close to completing wave [a] of Y of (B), so wave [b] should begin tomorrow or Wednesday at the latest. Wave [c] of Y will follow to complete the rally.

The reason I said that it is hard to believe yourself is a little fact that is not widely understood: it is generally not profitable to short intermediate term corrections in an ongoing bull market or bear market rally. The reason is that even though some stocks are correcting, sometimes significantly, overall the bias is to the upside and large speculators and institutions will be using the correction to buy at lower prices. You are better off to stay long only, but switch to taking profits at targets rather than letting positions run and forget shorting. So far, since this correction began, I am in the Small Gains - Small Losses = Zero category, which is frustrating though definitely alot better than Small Gains - Small Losses - Large Losses = Large Losses category. Anyway, since we are this far into it I won't switch strategies now. Better to keep with the same plan until the correction is over, and it will be over before too much longer.

If wave Y is the same length in time as wave W, then it should last well into next week. There is no way to know if we will see a complete retest of the February low, but I expect we will.

Now we have a new problem to consider. Since wave [A] of this bear market rally lasted into January and wave [B] is taking a longer than expected time, we should expect that wave [C] will last into the first of next year. This does not fit well with other cycle projections, so we will have to be careful to watch for a shorter wave [C]. In particular, we will have to trust that once wave [C] completes 5 waves up, the rally is over.

Some sectors are already moving or ready to move into new high ground for the rally: retail (XRT), home builders (XHB), e.g. The semis are holding up well also. This action doesn't fit with primary wave 3 down, and I am not seeing that view at the moment.

Well, the end of [B] will be coming soon. Let's make the most of it.