Firstly my apologies about not posting on here for such a long time to anyone who follows this blog. During the summer I have had the opportunity to do quite a decent amount of traveling and thinking... I took some chart print outs with me and was looking over and over and over them, searching for "The Count".
I can say that something quite interesting struck me and I have since changed (sorry) my count once more. I can say that in my last post I was expecting a retracement in FTSE that never came, this leads me to believe that it is pretty overbought at the moment... BUT, don't trade what you feel, trade what you see.
If you look back to an earlier post, I said that I thought we were seeing a double zig-zag a-b-c a-b-c, I couldn't see a clear 5 impulsive for my ( a ), but a clear 5 wave for my ( c ), so I concluded that a double zig-zag was probably on the cards.
However over summer I spotted this. Take a look at the red circle, its an expanding formation, with 5 points! In these sorts of patterns, the individual 5 waves tend to breakdown in 3 wave moves. The clearest of these are waves 3 and 5, which have a 3 wave internal structure. (so far so good)
Thus I re-label my bigger count (now in red) with he possibility of a 5 down. What this means now, is that the rally we have been seeing is still likely to be a 4, so I re-adjusted my Fib. retracements and look what we get, ESPECIALLY with today’s sell off.
Right on the money, 50% retracement of the big wave 3/C (now looking more likely to be a 3) causes real trouble for the market, resistance is strong and we see a sell off today (a strong one at that). If you look at the two blue circles, you can see that the MACD is suggesting the rally is surviving on borrowed time, we see a higher high in the price action, but the MACD has halted... this is pretty bearish.
What am I expecting to see?
At this point, the two most likely scenarios for me are:
1. The market starts to break down rapidly, making a 5 wave down formation to take out March lows (although a failed 5th is possible) and the REAL bear market rally takes off.
2. market pulls up once more to perhaps around 5000 or so, 4800 could be support, in which case we make a 5th wave up to complete c of big 4, this formation would have a extended 1st wave. THEN we start to crash.
I am feeling VERY bearish right now.
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