Recently, a number of global "P2" indices have exceeded or are challenging their respective April highs.
It should be noted that the term "P2" used in this post is not necessarily the same as the one implied by the primary count of U.S. stock indices by Mr. Prechter at EWI. In this post, "P2" indices are those that have the appearance of an impulse wave decline during the 2007-2009 financial crisis and a passable corrective wave subsequent rebound. In this sense, indices such as BSE (India) are excluded from this category.
The purpose of this post is not to stress the validity of the proposed counts, but to highlight the divergence among global markets during the proposed topping process, as well as the possibility that the SPX may not need to exceed the April high even within this framework.
The most notable indices that are already above or are challenging the April highs are TSX (Canada), DAX (Germany, effectively there), AEX (Netherlands, poised to do so soon) and STI (Singapore).
The following charts place these indices back into the "P2" framework. Under this interpretation, the recent advances represent unfinished business of "P2".
It's also possible (and probable) to cast SPX into the "unfinished business" category, especially given the near term effect of QE.
The chart to the right shows one such count that is in sync with the proposed unfinished-business counts for TSX, DAX, AEX and STI above.
But more importantly, as the chart on SPX shows, SPX has already satisfied the minimum requirement of this unfinished business by rising above the January high - (Y) of P2.
If this scenario plays out, we could be using terms such as "triple top", "nominal top in April" and "orthodox top in October" for SPX months and perhaps years down the road.
Please see Dollar Bottoming and Risk Assets Topping (10/8/10) for a discussion on the larger picture. "An overriding theme appears to be that the U.S. Dollar is in a bottoming phase and risk assets are topping. Anchoring on a relatively free market and make inferences on other financial markets should be especially helpful in this environment. We start with a discussion of the U.S. Dollar before moving on to other markets - interest rates, gold, stocks & vix and stocks in terms of gold. "