This bearish outlook is due to applying a logarithmic scale, resulting in a rising wedge pattern which is confirmed by the ATR divergence and which has been breached, signalling the start of a new downtrend or simply a correction.
If June's hanging man is confirmed, next target will probably be the bottom of the channel, but if price continues to decline and breach the channel, it will then confim the development of a wave 3 and it's corresponding long-term bear market.
If price invalidates the hanging man and keeps rising making a new all time high, then the price action since May 2015 was only a correction and the market will probably resume the uptrend.
For now, I think one should assume the trend is down.
I have something to add here....
If a correction of ABC happens, then the start point of A should be 2193.9 which is 8/15th......
DanV
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Interesting chart for sure.
I have similar outlook which I have held for some time and feel the 2015 top is potentially very significant one. Though I am not sure about your wave 1 decline which happened so quickly and can only see 3 swings rather than 5.
Could you please explain how you came to conclusion that is it is 5 wave impulse?
Look forward to hearing from you. Thank you for sharing.
DanV
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Here is my original chart
mikeoakster
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Thanks! Being your wave [4] an expanding triangle, shouldn't wave D go beyond wave B as well as wave E going beyond wave C? As for my counting, I find it very difficult to do with confidence, but here is my best effort: What I prefer to point out with my long-term analysis is that, by applying the log scale, one gets a huge rising wedge which has been broken, so, unless a new all time high occurs, I'm expecting to see the market retracing the entire wedge... till now, the index has just retraced 23,6%, which I find too short, but let's see. Do you agree with using the log scale for such a price range? Thanks again.
DanV
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Thank you for your reply.
Firstly, regarding my chart, the contracting triangle is acceptable and when cross referencing with Dow Transport and other major indices it seems to look reasonable. I left in on arithmetic scale, but do use semi-log and understand what you refer. to as big rising wedge.
Secondly, the counts on your chart suggesting Aug 2015 low as 5 wave decline do not look good. Having to try this much to fit the count means probably something else is at play. So I am treating it as 3 wave decline as 'W' and then we have expanding (abc) flat in SPX500 which complete and regular flat in Dow Ind which is near completion. These would mark the wave 'X' top in both indicies as shown in the chart
mikeoakster
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Thank you for your reply and analysis.
In a contracting triangle (in this case, would be a running triangle, as B goes beyond the beginning of A, right?), can wave C go beyond the end of wave A? I'm just trying to learn...
In your SPX500 chart, how do you count waves W and b of X?
DanV
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Yes in case of SPX500 the Expanding Flat (Not Running Flat) wave b goes beyong the origin of wave a and eave c goes beyond the origin of wave b, hence it is called expanding.
in the wave b of 'X' it is 3 swing, name,y abc. So the initial short drop is wave a retracement wace b and then long drop in 5 waves ac wave c. I have labelled these on the chart. . Hope this helps.
mikeoakster
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OK, Dan, you referred to your proposed triangle as being contracting, hence my question...
In your b of X, 1 of c is an expanding leading diagonal, right? In ELT, doesn't wave 5 need to go beyond wave 3?
If a correction of ABC happens, then the start point of A should be 2193.9 which is 8/15th......