The Week Ahead

We finished the day Friday with what appears to be a complete 5 waves down labeled as Minuette wave (i). If this count is correct, from here I would anticipate that we have a correction of this structure as an a-b-c wave (ii). Since this is a “First Wave” down from the highs at 10,407  a normal second wave would correct a minimum of 38% which is at 10,205. The primary rule to identify a “First Wave” is that it cannot exceed the high.Most often we find a second wave correction in the 50%-61.8% area. If the high at 10,407  is exceed then the alternate counts shown in the next chart would become my primary count.

Alternate Counts

The above chart shows the alternate count which would indicate that Minor wave 1 did not complete until the July 2nd low at 9714. The implication of this count is that the Thursday high was the completion of Minute wave [a] and we perhaps just finished Minor wave [b] at just beyond a 38% retracement of [a].This is a level we have often observed in a b wave correction, so at this juncture it is important to the downside that we do not take out the Thursday high at 10,407. If in the next couple of days this high is exceed then in all probability the alternate count is in place and the market would go on to test the April 26th high. Based on our current projection the first target I would look for is the 78.6% retracement level of the April high to July low which is at  10,906.

Good luck, and good trading.