Nearing The End Of The First Leg Down

The Qs came very close to the cited target zone for the first leg down of the correction today, but it is unclear if wave A or W (This is a correction from the labelling yesterday as wave C) is complete as this morning's gap down low appeared to complete a third wave, and the action during the rest of the day was more of a sideways consolidation suggestive of a 4th wave. The McClellan Oscillator closed the day at -252.73 which is well within the area where short term bottoms are formed. However, we may need to see a divergence develop over the next couple of days before wave B or X up begins. It will be interesting to see just how much of a divergence we get at the expected double top at the end of May.

Oil got hammered again today, and it is beginning to look like the overall pattern since the July 2009 bottom is a very large ending diagonal triangle. If so, the April 6, 2010 high is probably wave 3 of (C), and we are now in wave 4 of (C). Also, if correct, we should expect oil to continue down to 75 to 76 in the coming weeks before a final upthrust to above 90. The final movement should only take about 4 weeks, and we could see a sharp spike in an overthrow before oil collapses in relatively short order back to the July 2009 low around 60.

This is disappointing because it means the economy is probably a lot weaker than is currently being portrayed in the media, and because the triangle pattern that appeared to be playing out would have led to much higher prices and greater profits for longs. Overall, this is truly a negative development.