Saturday, August 17, 2013
MTU Weekend Ed. - Head and Shoulders (8/16/13 close)
Wave counts offer several key scenarios: the end of the Hope Rally, a major pullback in a bullish wave five since the 2009 low, or an extension of the post June advance to new highs. Each scenario is plausible, but also not without its challenges from a wave count perspective.
The end of the Hope Rally
Chart 2 counts the Hope Rally as a simple zigzag with a flat-like connecting structure. Chart 3 offers a more detailed count of the proposed five-wave advance since the 2011 low.
A major pullback in a bullish wave five since the 2009 low
Recent new all time highs in leading indexes make the Hope Rally since the 2009 low being a large fifth wave more likely than before. Under this interpretation, we track SP500 at wave 3 of (3) of  of a regular five-wave advance (Chart 4 green) or wave [C] of a potential ending diagonal triangle (Chart 4 red). The proposed EDT shows a better form in semi-log scale (Chart 5), where a potential wave [D] test of the 2009/2011 trend line appears likely.
An extension of the post June advance to new highs
With respect to a larger degree count, the proposed extension extends wave (5) in Chart 3 and wave [v] of 3 in Chart 4.
At an even larger degree, the proposed extension serves as a successful test of the long term breakout area in SP500 (Chart 6).