"He that would make his own liberty secure
must guard even his enemy from oppression;
for if he violates this duty
he establishes a precedent
that will reach to himself."

--Thomas Paine

UPDATED 20060512

COMMENT #162

CHART #s 333-335

1. We've constantly discussed the importance of focusing on the contract or market that best exemplifies the condition of the rest of a complex at a particular point in time.

2. At the low a few years ago, this market provided the best insight as to the importance of the bottom at hand as marked in the CHART by the large black "A" (see pages 283-92 of "The $upertrader's Reference Manual"):

3. The final decline from the blue Wave B high to the blue Wave C low was best seen to have unfolded in the following manner in the following market:

4. COMMENTS that were posted at the turns shown are marked in the CHART.

5. The next year, the market had rallied to the Inversion Cycle Index projected turn shown at the top of the CHART, had retested the prior year's low at the next set of important Inversion Cycle Indexes, and had then formed the Elliott Wave 1-2-1-2 sequence shown below:

6. The market was thus in prime position to stage an important rally.

7. A year later, we can see how the suggestion was that the rally appeared near, or at, completion.

8. The "Alternative" scenario presented in the CHART at the horizontal black line with the black text was the one that actually wound up being the correct interpretation.

9. The market set a Wave 4 low here … :

10. … and then proceeded to complete the two year, 3 legged advance two days later by completing an expanding triangle top.

11. Meanwhile, as the top was being set in the above market, the following market was seen to have already peaked several months earlier and was nowhere near its prior peak as the above market was making its high for the move.

12. That prior peak is seen in the following CHART as it was being set:

13. Note the up ascending triangle in the middle of the advance marked by the blue "X"s and black trendlines as we'll return to it at the end of this discussion.

14. A few months later, the following key market was again at an important low:

15. The above low was the low for the year in the above market and for most of the others in the complex.

16. Note how this same market was continuing to provide the clearest signals for the rest of the complex.

17. A couple of months later, the following market made a lower low for the year unsupported by others in the complex.

18. The entire 8 month decline was shown at the time as a complex a-b-c-x-a-b-c correction as marked in the CHART by the blue letters.

19. But our key market (see next CHART below) was not making a new low in October as was the above market.

20. A few months later, it appeared that the entire two year advance had been completed here:

21. One of the features of the advance was the market's ability to hold above the horizontal pink line and to set the black boxed Wave 2 low in October above the pink horizontal line.

22. Not all markets in the complex were able to hold that line.

23. The high shown above was a most important high.

24. However, the final high was to prove extremely elusive as the market evolved over the next year from the simple corrective movement shown above into an extremely complex movement.

25. Initially, the market acted as expected as it declined from the high shown in the above CHART over the next few weeks to the following low in January:

26. A rally followed over the next couple of months to the high shown here:

27. This high lasted for the rest of the year in this market.

28. But as we can see in the following CHART, the high of the moment was not confirmed by the following market that had been providing key insights over the prior year:

29. This non-confirmation became one of the more important events at the time as it signaled pending weakness and the sideways movement that was to follow over the next several months.

30. Further, the following market was far from confirmation of the high seen in other markets:

31. By the end of the month, the 21 calendar day cycle was beginning to manifest itself in this market:

32. A couple of months later, a low was ready to be set.

33. A few days later, we can see how the low had been retested, had held, and how an upward correction was in store:

34. The low in this market occurred at the next rep of the aforespecified 21 calendar day periodicity.

35. One of the important events that occurred at the time was that the following market was able to hold (though by less than 1 point) the pink horizontal line shown in the CHART.

36. A couple of months later, the complex was again ready to set an important high, and although the following periodicity was again right on-the-money …

37. … the following market began to provide better insights:

38. It is the above market that we will later revert to in today's discussion.

39. From the high, a nice stout decline ensued to the following low which occurred at the London Bombing:

40. A month later, the blue boxes shown below identified an Elliott Wave 1-2 sequence that suggested that the market was in weak position.

41. The blue boxed Wave 2 high was presented as having unfolded in a very complex a-b-c-x-a-b-c-x-a-b-c movement as shown in the CHART.

42. This high occurred at the next rep of the 21 calendar day periodicity as shown here:

43. Note how the above market, which was unable to confirm the new high for the year seen in other markets in March, was now making a new high for the year by breaking above the early year high shown in the upper left corner and marked in the upper right corner by the red horizontal dotted line.

44. A month or so later, an important high seemed in place as the market was setting its next corrective high:

45. Another month later saw a nice decline as having unfolded as shown in the following CHART:

46. The key here is that price, once again, was able to hold the pink horizontal dashed line just as it had a few months prior and after thrusting sharply downward.

47. This market was becoming the leader in providing insight for the rest of the complex.

48. As the low was being tested, the following market was far from the equivalent low marked in the following CHART by the horizontal pink dashed line:

49. In fact, all this market was able to do was to fill the gap shown and find support at the horizontal .618 price retracement level and green MLC and WLC boxes (Monthly and Weekly Linear Time Cycle Index projected lows).

50. It was from these lows that the current rally began.

51. A couple of months later, it appeared that the rally had exhausted its energy as was suggested by the following pristine relationships:

52. This peak occurred right on time as seen in the following CHARTs:

53. By the middle of the month, we were able to observe how the following contract was making new highs, but that the highs were not being confirmed by the above market:

54. This non-confirmation led to the following CHART as price retested the early month high:

55. By the end of the month, the market seemed set up to begin a decline in earnest.

56. The possibility of a short term rally to complete the right shoulder shown here was allowed for under this scenario:

57. But the market rallied for one more week beyond the expectation and set a high the next day after this CHART was released as the two blue boxes equated at 5 trading and 7 calendar days each:

58. This early year high is shown in the following CHART:

59. The high has still not been breached by the above market:

60. But the above was not the key market that was providing insight as to the rest of the complex.

61. The early March low here was seen to have set the reverse head-and-shoulders low marked in the CHART by the green cups (though the interpretation was not the favored one at the time):

62. The right shoulder held above the pink horizontal trendline drawn off the February low, after which a rally ensued.

63. Later in the month, another important high was at hand:

64. But after a decline over the next month, the market moved just a tad higher and then came upon the near-perfect setup reviewed at the time at the beginning of May:

65. The monthly CHART (below) ratified the May expectation.

66. The weekly suggested just a little more time was needed, however:

67. This additional time was provided when the market was able to rally through the pink horizontal line shown here and move a bit higher:

68. The final high, so far, occurred 5 trading days later.

69. The weekly configuration was updated here:

70. The day of the high to date occurred the day after these two CHARTs (above and below) were posted:

71. The perfect outcome was posted at the same time in the monthly CHART shown here:

72. With the above background in place, what we want to do now is to update the complex.

73. The first update is shown in CHART #333 of daily prices for the cash index.

74. One of the most important relationships of this CHART is shown in the upper right corner.

75. Here we see four sets of numbers that relate to the advance in price that has occurred in this market.

76. These four numbers are marked in the CHART by the green numbers.

77. The lowest number identifies the most recent price advance.

78. That low is identified in the CHART by the black numbers that relate to the date from which the last advance originated.

79. The black text just to the left and above the prices shown in the CHART show that this last leg lasted 17 trading and 23 calendar days to last Wednesday's high on the date specified in the CHART of 20060510.

80. The date of the low relative to this last swing is shown in the CHART at last month's low.

81. The next green number is measured from the blue Wave b low shown in the CHART.

82. The third green number is measured from the blue Wave x shown in the CHART.

83. The black bracket to the left of the two aforespecified price advances shows that the two legs (the blue Wave c advance divided into the blue Wave a-b-c advance from the blue Wave x low) is 1.296 (SQ RT PHI=1.272).

84. This is an important price relationship in the interpretation shown.

85. The final green number reported (the fourth and highest of the four green numbers in the upper right corner) shows the total advance through Wednesday's high from the low of 4 years ago.

86. One of the most important features of this market is seen in the two green numbers framed by the black boxes.

87. What is important are the relationships from the blue Wave b low.

88. From that low, three green numbers are shown in January, March and May.

89. Obviously, the January number is the largest.

90. What is important about the three is that the last one of the three did not exceed the second one of the three.

91. Had this happened, the "5th" wave of the blue Wave c advance would be larger than the "3rd" wave of the blue Wave c advance shown.

92. Such an event is, supposedly, a no-no (see pages 283-92 of "The $upertrader's Reference Manual").

93. We can see that the rise has taken price to just above the red upper up channel trendline and up to the blue center ascending pitchfork line shown.

94. For example, we can see, at the blue Wave a high shown in the CHART, that the advance shown required 91 trading days to complete (FIBONACCI #=89).

95. On the other hand, the black text above price shows that the blue Wave c advance shown in the CHART required 143 trading days to complete (FIBONACCI #=144).

96. Since the blue Wave b decline (or sideways correction) lasted 154 trading days (FIBONACCI #=144 and 2 X 77=154), the total movement lasted 388 trading days (FIBONACCI #=377) with 234 up and 154 down days (FIBONACCI #=233).

97. The total number of trading days in the advance shown versus the up days is thus 1.658 (PHI=1.618).

98. The blue Wave c advance versus the blue Wave a advance is 1.571 (PHI=1.618).

99. The two black boxes shown on the CHART show that the totality of the advance to Wednesday's high is PHI-related to the beginning price level of 4 years ago and that the totality of the advance versus the first a-b-c movement of 16 months (2 X FIBONACCI #8=16) is also PHI-related.

100. The advance of 1,276.10 points of that blue Wave a (1000 X SQ RT PHI=1,272) should not go unnoticed.

101. Nor should the blue Wave c advance of 1,513.75 points (1000 X 1.500=1,500).

102. If the pattern of the blue Wave c advance were a clear 5 wave impulsive movement, all would be well in Elliott Wave land.

103. When we take a look at CHART #334, however, we see several problems with the advance from the low shown in the lower left corner of the CHART.

104. For example, way back here in the above discussion, we saw how the blue "X"s shown in the CHART identified a similar period as that shown in today's #334 CHART from the January high to the April low.

105. We can see now, as then, a period of overlapping prices.

106. The 2004 CHART saw converging trendlines and, thereby, suggested an ending movement.

107. Today's CHART #334 does not show converging trendlines.

108. Instead, we see the channels.

109. Further, we can see that price has apparently reacted to the channels by setting a high in March and, then, later, another high in May.

110. However, the advance from the April low to the May high only appears as a 3 legged move.

111. And given the overlaps shown by the pink horizontal lines, it's tough to say what the movement shown in CHART #334 is actually supposed to represent.

112. And that is the thesis of this post.

113. It is how different contracts/markets provide key insights at various times as to the rest of the complex and how such insights sometimes even extend into other complexes.

114. CHART #335, for example, of daily prices, seems to be far more insightful as to the current structure of the market.

115. We've already reviewed how this market gained a position of prominence last year.

116. A couple of such examples are again presented here:

117. The last one at the pink horizontal trendline is especially of importance now since the #335 CHART contains all price action since that low.

118. From the low, the market is seen as having unfolded in the sequence identified by the 5 blue numbers.

119. What is important about this movement is that the 5 blue numbers identify the 5 points of the ascending diagonal triangle marked in the CHART by the two thick red ascending trendlines.

120. This formation is different than the one seen in the #334 CHART in that the lines are converging lines versus the parallel lines seen in the previous CHART.

121. Further, Tuesday's high in this CHART occurred at just a tad above the upper ascending thick red diagonal trendline (a common occurrence) and just below the thin parallel upper red channel trendline shown in the CHART (the thin red parallel up trendline is actually irrelevant to the discussion).

122. It is extremely important that each of the five blue numbered waves can clearly be seen to have unfolded in a 3-legged a-b-c manner (though the blue 5th is admittedly not as clear as each of the first 4).

123. It is extremely important that the two corrective declines each lasted 18 trading and 27 calendar days (equality), or 36 trading and 54 total calendar days total (FIBONACCI #s=34 & 55).

124. When we inspect the number of trading days in the three advancing legs, we see 55, 29 & 16 (FIBONACCI #=55, 2 X FIBONACCI #8=16 & LUCAS #=29).

125. The point is that each successive advancing leg was about ½ that of the prior advancing leg.

126. The green numbers which measure the extent of each advance show that the 5th and 3rd waves are about equal and that the 1st is about 1.647 that of the 3rd (PHI=1.618).

127. In calendar days, the movement shows 146 up and 54 down, 200 total (FIBONACCI #s=144 & 55 & LUCAS #=199).

128. 200/146=1.370 (1.000+SQ[1/PHI]=1.382).

129. The total advance lasted 61.29 points (100 X 1/PHI=61.80).

130. Versus the blue 5th wave advance, as may be seen in the upper right corner of the CHART, the total advance from the blue Wave b low of 61.29 points measures 2.616 (SQ PHI=2.618).

131. The relationship of price at Tuesday's high versus the lower blue prong of the ascending pitchfork shows that price to be in very weak position with respect to the movement shown as the last price advance has only served to bring price back up to the weakest prong of the early rate of ascent.

132. At this time, the movement shown seems to be the key one to study in this complex.

133. The movement shown suggests that an important top has been set.

134. We can see that previous expectations of a peak in April of 2004, December of 2004, March of 2005, June of 2005, August of 2005, January 11 of 2006, and March 21 of 2006 all resulted in very tradable and profitable declines even though each peak did not prove to be the FINAL peak from the 2002 low.

135. Time will tell if the current peak is the FINAL peak from that low or not.

136. The above analysis suggests that it is.