The Jaws of something pattern does not exist as far as I am concerned. Nevertheless it is possible to get  similar result by labelling the patterns in a proper way. There seems to be general agreement that we are at the end of a wave 3 of a 5 wave sequence starting sometime during the industrial revolution. The conclusion , therefore, must be that we are in some 4th wave of a similar large degree. Many believe that the actual top of wave 3 occurred in 1999/2000, which might be appropriate considering the change in century , the tech debacle  and Y2K. 4th waves often take the form of triangles, sometimes expanding horizontal ones. That would fit perfectly right here and explains, to some extent, the wild gyrations we have had over the past 10/15 years. A fourth wave horizontal expanding triangle is a perfectly legitimate structure in the vocabulary of EWers. It is a 3-3-3-3-3, a-b-c-d-e, 5-wave structure that typically ends at the bottom trend line or, at least, near it.

If correct the market has a little way to go up to say , roughly, 16000 and then the market should collapse to about 6000, not a big feat considering that it has done that already twice in this one , single, 4th wave. If the count is correct, the market should recuperate and make a new high in wave 5 to finish the 300+ 5-wave sequence. That would complete wave 1 of some super degree to be followed by wave 2. You do not want to ride that one out!!

I have used a semi-log scale chart as it tends to put the moves in a better perspective.

On closer inspection, I got the number wrong. It should be 12876  (2 May, 2011) and the high today is 12869.95 so there are still 6 ticks to spare. Should the scenario be negated, then it is worth keeping in mind that this is occurring on the Dow only (at least among major indexes) so the scenario would still be intact. Also the Dow might be the most watched but it is also the most easily manipulated (see previous blog on CAT), simple because just 3 or 4 stocks have a disproportionate effect on the Dow.

At this morning’s high the Dow was within 16 ticks of the 2011 spring high. If that happens it would negate the most plausible count that underlies the immediate bearish scenario. What will take its place remains to be seen. We will cross that bridge when it happens. The number is 12841 intraday, see previous blogs.

Nice to know; the average holding period for a stock in the US?? 22 seconds!

From stockcharts the high reading on the Dow, on the 2nd of May 2011 was 12876, intraday. The recent high on Jan.  26, 2012 was 12841, intraday. Ergo we did not make a new high (yet?) and the count still stands, that is this is the top of a wave 2 of 3. 3 of 3 is about to start. Apart from the price itself, the structure definitely supports this view. So does, of course, the fact that only the Dow has managed to retrace, for practical purposes, 100% of the preceding drop. No other index comes even close. One has to be careful not to embrace conspiracy theories  too readily, but the simple fact that the Fed would announce the extra year of ultra low rates and think out loud about QE3 exactly at such a critical point, in the absence of any fundamental reasons, makes you wonder.