EW requires a daily chart that I do not have. Barring that here is the take on what I do have. There is a very clear, almost text book wave 1 down, followed by a retracement precisely as would be expected, that is to the top of the minor triangle wave 4. Then we do almost the exact same thing but on a slightly smaller scale. Though it is not possible to unequivocally draw a conclusion, the evidence suggests  that this was 1-2, 1-2 of different degrees and that things are going to accelerate.  This could make sense considering that the wave shown is itself a wave 3, perhaps, in a bigger picture. Furthermore there is no alternation which lowers the chances of this being a single wave. Time will tell.

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Today we ran up almost two hundred points in the last hour or so, supposedly on rumours with regard to the Eurozone. Whatever. The TSX appears to be well into wave 3 of C. The count shown is just a wild guess. Expect the market to go a little higher tomorrow despite horrendous results from RIM, and then the down trend should resume. The normal 5 wave sequence appear to be breaking down into 1-2.1-2 etc etc 4-5, 4-5. It is hard to know where you are but given the a-b-c counter trends we should go lower, probable much lower.

Un till there is a convincing argument to expect otherwise we will stick to the basic EW model A-B-C correction. The target is about 7500 and perhaps a lot lower. When is hard to say but it is obviously a function of the forces that are working against this happening. These take time to exhaust themselves. Amusing things happen in the mean time. Who would have thought that the Americans would blame the Europeans for the most recent problems, conveniently forgetting that their economic situation is about twice as bad (at least in terms of debt). It is unreasonable to expect the Greeks and Germans to fall in love all of a sudden, but the chances of the Republicans and Democrats agreeing on taxation being part of civilization is even more remote, despite three years now with above a trillion deficits. Anyway the best guess would be between now and 2016. How is easier, see below;

This is just a tentative picture. C waves are always 5-wave structures and should develop more or less along the above path. It may not be Europe in the end, perhaps it will be the USA. Elections are only a few months away and the “back-burner” status that the US has enjoyed while Europe blows up, may soon be over.

Here is the TSX 60 capped index, indistinguishable from the “normal” TSX but the weightings of the individual stocks do not change. As an aside, you will notice that even if different, it looks an awful  lot like Potash below! This index makes calculations a lot easier. From 1000 to 500 is 50%, back to 900 is 80%. The ideal EW target is at 350, the 4th wave of previous degree, also about where C=A even if that point lies 100 points higher depending on when this might happen. Our Head & Shoulder friends should be delighted by this chart. Each shoulder takes a little more than a year (so we may just have a little bounce, in wave 2 of 3 of C). Also the top line and the bottom line are at respectively 62 and 38 percent of the decline in A. 750 would be the dead centre of the whole H&S structure. The pattern targets 600 as a minimum, which point is also found by connecting the lows of ‘02 and ‘09, but if symmetry holds we should be at 500 in about a year. Time will tell.

Originally we would have expected the retracement to stop, on average, at the 62% line from where we would have expected the decline to resume. So , in effect we are wrong by 2 years, but now we are back at the same point equally convinced that the bear will soon grind this market lower.