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Summary

  • Long Term Outlook: Up
  • Medium Term Outlook: Sideways to Up
  • Short Term Outlook: Sideways to Down
  • Long Term Outlook Revision Point: Break below 4782.25
  • Potential Long Term Targets: 15,740 and above
  • Current Short Term Position: Flat
  • Preferred Strategy: Looking for Low Risk, High Probability Buy Signals to take Small Term long positions.

One of the most intriguing market phenomena is to see the market moves transpire in a way that seemed most unlikely before hand. The last week was one of the classic examples of such a happening. The move that we had considered the least likely in our previous report was the one that we saw transpiring during the week.

The main image shows the position of the index as it appears at the close of March 12, 2010. With the market making new highs on March 12, ’10, we are forced back to our original count present during the few weeks preceding the last one. As per this count, we have a potential wave 3.iii at the January 19, ’10 high, wave a.4.iii at the January 28, ’10 low; wave b.4.iii at the February 19, ’10 high and wave c.4.iii at the March 4, ’10 low. However, wave 4.iii may have completed at the completion of wave c.4.iii or, alternatively, it may still be continuing in the form of a possible fourth wave expanding triangle. In the current report we focus in on these two alternatives.

In the second image, we have considered the possibility of a completed fourth wave at the March 4, ’10 low. If this is correct, then the upward move since the March 4, ’10 low is a wave 5.iii rally, which is likely to take the index above the 10100 level, without breaking below the March 4, ’10 low.

Alternatively, considering the possibility that the March 4, ’10 low is not a completed wave 4.iii, brings about the possibility that we may see a fourth wave expanding triangle forming, as shown in the third image. One of the characteristics of an expanding triangle is that its d wave is longer than the b wave and wave e is longer than wave c. Keeping this characteristic of expanding triangles in mind, we may see a fall slightly below the March 4, ’10 low before we see the final fifth wave rally to get underway.

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