Revisiting our discussion on “Which Elliott Wave 3 are we in Currently?” the question has now shifted to “Which Elliott Wave 4 are we in Currently?” as evidenced by these two possible wave counts below.  Let’s take a look at these competing interpretations and discuss which might be the more probable - or palatable - scenario.

First, the “Wave 3 is Finished” Chart with Projection:

I’ll try to let the charts speak for themselves.  Most Elliott interpretations are in sync with the circled 1 and 2 waves, but it’s the other circled or ‘large scale’ waves that are open to interpretation.  I’ll jump into discussing these waves only.

Under the first scenario - which I deem the more ‘bullish’ assessment because the termination point of Wave 5 is higher and the down impulse is only 5 more waves away from ending completely - we have already completed fractal wave 3 and are now in… or perhaps even ending… Corrective Wave 4 up.

If this is the case, then look to the bottom left of the chart where I’ve drawn a projection of the next expected 5-wave decline which should take us to S&P value 700 or beneath.  We’ll know this is the official count if we break the 750 November low.

This scenario fractalizes the 3rd wave and has the “third of third” be extended as expected.  You can see how I’ve labeled each fractal wave.

I did want to note a similarity between the currently labeled circled “Wave 4″ and the circled corrective Wave 2 - both of which look quite similar (and might suggest there’s still a little bit of time left in this wave for equality of time).  However, the corrective wave looks like a ‘flag’ or perhaps a ‘wedge,’ both of which are bearish short-term.

Let’s now look at a more ‘bearish’ count that has us still in large-scale (circled) Wave 3 down.

Second, the “Wave 3 is Still Going On” Chart with Projections:

I feel bad even bringing up this possibility, and I refer to this count as a more ‘bearish’ count because it assumes that we have 13 more ‘waves’ to go until we reach the official ‘bottom’ and that the bottom will occur perhaps much lower than the previous count - perhaps as low as 550 (some counts even have us going to 450).

Under this count, large-scale (circled) wave 3 is still going on, and that we are either in fractal 4 of circled 3 or are just beginning the first wave of fractal 5 down which would imply that the end of the 3rd wave down - which started in May 2008 - would end at or beneath the November lows.

To add a bit of bullish spice to this count, if this is the case, then we’ll have a large-scale circled 4 wave up which could take us as high as 1,100 or beyond… before price collapsed into the final circled 5th wave which could take us down to new lows not seen in over a decade.  I’ve idealized the projected count at the bottom left of the chart for you.

The red arrow marks a “you are here” point.

I wanted to share these competing counts and open up the page for discussion for your thoughts and analysis to share with each other.

Corey Rosenbloom
Afraid to Trade.com