Friday, July 24, 2009

We're coming to the end, but which one?

Today gave us the wave 4 I was looking for and a test of the highs. While we certainly may see more upside on Monday, it should be a sell any gap and the beginning of our first retracement since the rally began two weeks ago. Any gap down may not be filled, so be careful on the downside.

From a technical EW perspective, there is nothing to say this is not the primary wave 2 top. So keep this in the upmost part of your mind as the price action unfolds to the downside. However, we have not built up any divergences on the daily chart, so it would be more likely for us to pull back to the 925-940 area before moving to our final wave up and the end of this most incredible bear market rally. I guess you have to live through one to know how long and sharp they can be. But in the end, we will drive to new lows.

My turn dates still stand 8/8 - 9/8. If this is a b wave it should only last a week or less. That would give us another two plus weeks to finish off the last move up and put us right in the sweet spot for my turn dates.

Should we get a confirmed breakout below 925, then it is very likely over for our bear rally. A break of 869 will confirm it.

Finally, I'm going camping next week to Fort Bragg on the California coast. It will be a nice break from the heat (100+ degrees in the Sacramento area), so you'll be on your own as I forget about the markets and enjoy the weather with family and friends. Have a great week!


  1. This bull seems to be climbing a wall of worry. So far I haven't seen any bullish peaks in sentiment, and if that doesn't happen the market can just continue higher. After falling 50% from the 2007 peak back to the March trough, I'ld be more inclined to call that a cycle bottom. The 5 yr bull run from Oct2002 - Oct2007 could be the current roadmap going forward..

  2. Jean, there are many many reasons why I would not compare this to the 2002 bottom. But here are two really simple reasons:

    - the 2002 bottom was not a 5 wave move down
    - the 2002 bottom was retested 5 months off the low and held.

    In our current situation we are already coming on our 5 month mark. If we are going to retest the lows it would be very soon, so even if it held I would make so much money on the retest it wouldn't matter if I was right or wrong. Regardless, no bear market has ever reversed without a retest of a spike or a rounding bottoming process. Since right now we have neither it would seem that the odds are in my favor. Now if the move down does not sport impulsive waves, then I would start to lean on the retest holding. However, I will believe it when I see it. Right now, the risk to reward ratio is clearly in the bear camp.

  3. Hey Rich, was trying to reach you by email but couldn't find any contact info. Do you have an email address you can be reached at? Thanks!

  4. D.B., I thought my email is posted at the top of the blog, but maybe that is only when I'm looking at it! You can reach me at

  5. Hi Rich,

    Any books you can recommend me on how to calculate turn dates & time cycles? I'm assuming you're using fibonacci ratios to forecast your turn dates.


  6. ollie,
    Take a look at this site.

    I have no opinion of this method but it looks like tomorrow July 30 will be a special day.

  7. Hi Rich

    Thank you for all your detailed posts. I enjoy reading them. I am a complete novice to EW and I like the way you label the waves.

    I dont wish to annoy you, but i was wondering if i could ask a (stupid) question? All the different EW chiefs are all stating that this is the run to P2, is it possible that this is wave 4 of Primary 1 with wave 3 bottoming in March?

    Is it P2 because there is a concensus that the marekt top in q3 2007 was P5?

    If not, Would you mind briefly explaining why this is P2 to a newbie?

    Many thanks.

  8. ollie - i'm not an expert on turn dates. I do look at fibonacci time zones and extentions (via software), but more importantly I look at the length of waves and use them to approximate the length of the next wave. Since wave A lasted ~3 months, B lasted ~1 month, then if C=A then it would also last 3 months. However, in my experience when you get a very powerful A wave, then C waves tend to be much smaller especially when the B wave is small. So instead of 3 months I took 1-2 months as that was the B wave plus a hedge ;-). Nothing to rocket science about it. In the end the market has the last say as always. There is a fib turn date coming up at the end of Sept but I don't think I'll worry about that date until we get there.

  9. paulj - one of my key tenants of wave charting is that waves of the same degree have the same characteristics. For example, wave 2s and 4s of the same degree will likely end with the same level of RSI, in this case being overbought in the same area, along with their reaction to key moving averages. When price action takes you beyond what you expect, then you are likely looking at a larger degree wave. Because the price action since the March bottom has not acted at all like any of the corrections we encountered from the Q3 top to the bottom, then it must be a larger degree price correction. Since the move from Q3 sports a 5 wave move (see my chart at the right), then it would make the most sense that it was a primary 1/A wave and this is a primary 2/B wave.

    The top in Oct was not only a primary wave 5 top, but likely a cycle wave top, supercycle wave top and grand supercycle wave top. By the time this is all over the stock market will definitely be beaten up. And it will take years to sort it all out. In the mean time, we watch for price action to confirm a new downtrend, which it has yet to do.

  10. ollie - sorry, I relooked at the fib turn dates and the next fib turn date (using weekly charts) was last week +/- one week, which would include this week.