Weekly Overview for May 12th

may-12-1

The Dow Jones has broken into all-time highs for three consecutive months. If the move up from the March 2009 low is a double zig, Primary Y should be nearing equality with W. I am almost convinced that the Dow is in a wave 4 correction. However, as for what kind of correction, this remains to be seen. If the index is in a correction then no matter whether it is in an expanded flat or expanding triangle, the move up would have to be a three which is about to finish off.

I say if because one cannot ignore that the move up since the low on November 11 2012 has been very strong and impulsive like in nature. Even though it would leave the wave 4 at super cycle degree short of the 38.2% retrace of 2 (short for a wave 4 vs. 2), one cannot leave out the possibility that we are in a wave 5 to complete the one hundred year impulse.

However, I would like to see super cycle wave 4 = 61.8 of wave 2. This would leave the Dow, as mentioned, yet to complete 4; and right now, the Dow has moved into the territory of both Y = w of cycle b and C = A of primary Y for the expected move down in the index.

may-12-2

Looking at the wave counts from a weekly chart, I am favoring a move up to the 1600, but not before we get a good retracement for a wave 4 at minor degree. If so, from there the Dow should finish off a wave 5 about equal to wave one at the 1600 mark.

may-12-3

Both the 10 and the 30yr bond yields have been trending up nicely since the beginning of the month. And just as a correction is due in the Dow, interest rates are also due for a short term correction. But at the intraday degrees, we should get a push up to finish off the wave 5 impulse.

may-12-4

The US dollar has broken out against the majors in a big way. Regardless of how you have this counted, the move up from the Sept 14 low looks impulsive and not yet completed. Since the move in the Dollar has been broad based, I am looking for the move to continue for at least the rest of the month.

may-12-5

The USD/JPY broke out from the suspected triangle which is supposed to be thrusting into an ending wave 5. Technicals tell us that the move up is nearing critical resistance. However, one most also keep in mind that the wave 4 triangle retraced a wave 3 that was only 127.2 of wave 1. This must not leave out the possibility that wave 5 could extend to at least the 107. However, first we should get a retest of the b d triangle trend line, a nice place to inter a long position.

The world is playing the US QE monetary game, and traders are all out for risk. But one must not lose the Elliott Wave rule that wave structure dominates both fundamental and correlations.

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