Will The Real Count Please Stand Up?

QQQQ Preferred Count




QQQQ Alternate Count



Wilshire 5000 Preferred Count



Wilshire 5000 Alternate Count

The above charts show my preferred and alternate counts for the Qs and the Wilshire 5000.

In my preferred count for the Qs, we have now completed wave (1) of [C], and we are now entering wave (2), which is a correction of intermediate degree. The equivalent corrections in wave [A] each lasted about 4 weeks, and I think we should expect something on that order now. The validity of this count requires that we remain above the February 5 low, but does not preclude a deep retracement toward that level. What I like about this count is that it does not violate any rules, wave (4) alternates in form with wave (2) and wave [B] corrects into the zone of wave 4 of (3).

My alternate count for the Qs shows that we have just completed wave [A] which means we are entering a correction of primary degree. Wave [B] would be correcting the entire rally from the March 9, 2009 low. There are two problems with this count: 1) a cycle high is expected later this summer, and 2) wave (4) does not alternate in form with wave (2) and is not proportional with wave (2). The first problem could be overcome with a large flat correction with wave (B) making a new high later this summer above the top of [A].

In my preferred count for the Wilshire 5000 index we have just completed wave A of (Z) of [W]. This is a complex triple zigzag. This fits well with the preferred count for the Qs even though the form is different, and will lead to the Qs making new highs about 1 month after the broader markets top later this summer, which is exactly what happened in 2007.

It would be cleaner if the Wilshire 5000 exhibited the same impulsive form of the Qs, but the more I have tried to make it work in my alternate count, the last chart, the less I like it. Nevertheless, it does fit well with the timing of the alternate count for the Qs.

The main points that I would like to get across with these elliott wave counts is that 1) the idea expressed by some technicians that we have just completed primary wave 2 doesn't fit with either of the counts for the Qs, 2) a top now doesn't fit with what I know about where we are in the cycle, and 3) if any of these counts is correct, we have much further to go with this cyclical bull market than many expect. In fact, it is possible, and I believe that this will prove to be the case, that we are only in the first major leg of this cyclical bull market - wave [A] or [W], and that the final high won't be seen until 2011 or even 2012.

Last year that just didn't seem possible to me or most anyone that I have followed, but that is the way it is playing out, and the strong move in the SP500 above the decadal pivot of 1160.75 this April supports that view. The only thing that could derail any of the above is a powerful impulsive move down below the February 5, 2010 low. And even then, we can't be sure that such a move would not simply be wave (A) of [B] or [X].

The action this week has probably demonstrated to overleveraged longs what being on the wrong side of a difficult market can do, but the same can be said for the bears that are continually trying to catch the top of wave [2]. There was a time to try for that, but it has passed, and we need to let the current cyclical bull market play itself out before trying to ride that train again.