Our previous newsletter for the DOW on Sept 25th 2012 indicated that we were tracing out two ending diagonal (ED) patterns for the DOW. The smaller ED pattern completed shortly after the Sept 25th newsletter and the decline completed at our target in Nov. The following rally that started on Nov 17 2012 was the start of wave (5) up for the DOW and S&P500 as the final rally to complete the larger ED pattern. Both of the ED patterns for the NAS completed on Sept 21st, but the DOW and SPX were still in the larger ED pattern as discussed as a possibility in that newsletter. The DOW and SPX rallied above the top trendline in a throw-over, which now appears complete. We have also been tracing out an ED pattern for the DAX and a smaller pattern for the Nasdaq in wave C of (2), which also appear to be complete, but we are still monitoring the current pullback and a number of trendlines to confirm.
The chart below illustrates our chart from Sept 25th for the smaller ED pattern. When ED patterns complete they are always followed with a sharp decline to the starting point of the pattern. You can see how the decline on the following chart dropped to the beginning of the ED pattern before starting to rally.
DOW smaller ED pattern
DOW larger ED pattern
The larger ED pattern illustrated above is also a bearish pattern, but it has deeper downside targets and completes a larger degree advance, which is even more bearish. We would expect to see a move below the lower trendline with steep downside to at least the beginning of the ED pattern near the 10000 area. The downside would not be complete at this level, but we could see a strong bear rally. We still need to see a little more action to confirm that the reversal is in play, but this newsletter was issued to give you a heads up so you will understand what is happening when the downside accelerates.
These charts are only a guide so that you can follow the action and monitor the expected outcome. The action could play out exactly as illustrated or it may need minor adjustments as we follow it through.
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The commentary and forecasts are updated daily, including intraday commentary and chart updates. Fibonacci pivot dates and cycle analysis are also utilized to forecast reversal dates. The indices covered include the NASDAQ, DOW, S&P 500, SOX, Nikkei, DOW Transports, TSX, BSE, KSE, AORD, HSI, DAX and FTSE. Commodity charts include Copper, XOI, Crude Oil, Nat Gas, Gold, GLD ETF, Silver, SLV ETF, HUI and/or the XAU (Gold and Silver index). Additional Elliott Wave charts cover the US Dollar (USD), EURO FXE ETF, Canadian Dollar (CAD) FXC ETF, 10 Year Treasury Note Yield (TNX), Bank Index (BKX)
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