Markets finally form potential impulse wave count eventually leading to all time high

I'm finally back and ready to focus on the markets again after taking a hiatus for a couple of reasons. First,  as of yesterday I am a proud granddad for the first time but, I am a granddad on both sides at the same time with a beautiful baby girl and beautiful baby boy with only 14 hours between them...what are the odds of that..:-)         
            
And second, as far as the markets are concerned it was a perfect time to step back and let the chart patterns work to form some clarity as to what traders are thinking.

It's hard to believe indices have recovered back to the all-time-highs with the Nasdaq making new highs during a pandemic that has caused the worse financial conditions at least back to 1929 and probably percentage wise much worse.

In the years as a Hedge Fund and Pension fund trader on Wall Street I had a rule! Wave 2 corrections could never exceed 78.6% of the corresponding Wave 1 unless the chart pattern was extremely clean. Even though the only rule for wave 2 is that they can't breach the starting price point of wave 1. In my experience anything pass 78.6% is the first clue that it is not wave 2 and that you have to recount.

In the case now price breached this area several weeks ago and at that point our view of the wave formation changed making our alternate wave counts as primary counts which meant we would probably see new All-Time-Highs one more time before completing the "intermediate" degree wave (5) from the 2009 lows.

After labeling and showing a large "intermediate" wave (4), as an Elliott "running flat" or as an "expanding triangle) from early 2019 that needed a large decline to finish wave C or E of (4). We were wondering what could happen to give us such a drastic decline from the February high to complete the wave (4) correction and then it happened....a virus unlike the world has ever seen...never saw that coming!

The drastic effect it had on the economy almost instantly caused us to come up with a wave count that allowed for "intermediate" wave (5) to be complete at the high. As readers know and if you've watched our youtube channel we are also counting the high whether in February or with one last push now as also completing "primary" wave [5] from the 2009 low - of "cycle" wave V from the 1974 low - of "super cycle" wave (V) from the 1929 low which ultimately completes the largest degree of "Grand Super Cycle" wave [III] going back over 200 years.

Four weeks ago the chart patterns from the March low were extremely ambivalent making determining whether the rally was a bear market or the fifth wave to new highs. There are several reasons why chart patterns look like this and as we discussed from 2011 through 2015 we are now back in the same situations where markets are being manipulated by Fed interventions.

We clearly saw what markets do when the Federal Government tries to prop markets up. During the 2011 / 2015 time period it seemed that market internal readings that had worked since markets began stopped working. Meaning that technical indicators like momentum and relative strength just had divergences on top of divergences. Call/Put ratios didn't work and the all important market sentiment indicators which show the contrarian view of prices would stay at levels that normally signal a market top. The same thing is happening now which is because the Fed is back at it.

In late 2014 and 2015 it had been exhausting trying to count all the little sub-waves within the rally causing it to be labeled "the most hated rally in history" among traders. After several years the first clue we had as far as Elliott formations go was that an "ending diagonal" appeared in the 2015 top which turned out to be the end of "minor" wave 3 of "intermediate" wave (3).

The same thing is happening now for the same reasons...the market isn't rallying because the Corona Virus is going to disappear or because the economy is going to come roaring back. It's happening because millions of new trading accounts have opened this year with the idea that the markets will only go up because the Fed is printing money. All of these first time traders are going to learn the hard way that when the wave formation finally completes the market won't care about Fed intervention!!!

Now, over the past few weeks the wave count has formed enough waves to allow an impulse formation to be labeled. Our first real indication as far as Elliott goes was the decline (shown on the SPX chart) labeled as wave 4. We pointed out at the time that if wave (2) was complete that the initial decline should have broken and overlapped the top of wave 1 on the chart....we also pointed this out on the video channel. Two months later now we can see that Elliott was showing us that the rally from the lows was probably more than a bear market correction.

From that point on the chart and since, there are a couple of ways to label the chart with the only differences being that each one just allows a little higher price before finishing the sub-divisions and all the sub-waves of an impulse five waves that completes the very long term bull market.

Just like we explained above...all of the indicators are already at places that normally would have indicated a turn in markets. But, the Fed strategy to prop prices up to try to manipulate Social Mood will probably work until we see new highs.

In a way...the wave count actually makes more sense than you might think. For those that have studied Elliott's original work...you know that fifth wave tops, especially of larger degree, happen and take place during bad fundamental news. This is exactly what's happening now....the world is a mess but the market needs to finish a fifth wave high even in the face of such bad economics world wide.

When complete, the beginning of a "Grand super cycle" degree wave (IV) decline will be worse than the February / March decline and will last much much longer. All indications that this started from the February high was apparent especially with record price drops and rallies just like a "grand super cycle" event would call for. There was just one major piece that was missing....the rally into February happened on good news and not bad news! In hind sight this was really our first clue as to the correct Elliott Wave.

In summary....The S&P is just points away from new highs and the Dow is lagging even further behind but has started to play catch up. Until the S&P crosses to new highs it still qualifies as a very large wave (2). The pattern does look impulsive now with the lack of any key overlaps so unless the S&P price falls below 3300.00 forming an overlap shown on the chart we will look for the sub-waves to continue as labeled on the charts.

We'll be doing a YouTube video on our channel soon which will show all the charts as we discuss them which is a much better way to explain what the markets are doing rather than a lot of written commentary.   STAY SAFE

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