Our missive today is to the point, and primarily by way of charts. It warns again of an upcoming Elliott Wave Four. If you have been reading our past blog posts, you are probably aware of our TP targets, overall market viewpoints, and Elliott Wave counts.
Last week as a small example, we warned of the coming minor wave four down that was then shown in orange on the SP 500 chart. In our view, that minor wave four is currently in progress just as we had forecast.
To make our point very clear - that is NOT the Elliott Wave (EW) four we are referring to or warning about herein. The four wave we discuss is on a larger scale.
The Elliott Wave Four which we warn of herein, is the one following completion of the more significant wave three. We have marked this more significant EW count in green for some time.
Naturally, we must caution in advance, that we are making two assumptions about our recent blog posts. First we are relying on our EW count to remain accurate. So far - so good, as our recent EW counts have worked out now for months. Equally, we are counting on no cycle inversion.
We will not discuss cycle inversion in this blog due to complexity, and the proprietary nature of our KRTT cycle theories. In essence, we are reminding you that markets are dynamic, new information arrives daily that must be included, and like all good traders and investors - we reserve the right to amend our forecast and change our minds.
However, the topic we teach and educate on today is extremely valuable. We wish to discuss the nature and characteristics of an Elliott Wave Four.
Elliott Wave Four go against the main (or larger) impulsive trend, and are essentially a counter-trend. They are the second last wave in an impulsive move.
However, unlike the Wave Two counter trend which is more predictable and some would say even docile, wave fours are famous for surprise, abrupt market change, and moves that surprise even the savviest of analysts.
Finally, wave fours can also fail, and even terminate the major impulsive trend. When this worst-case situation happens, although rare, it is referred to as a wave five failure, since the expected wave five is truncated, and fails to deliver the final expected thrust, thus creating considerable confusion.
In short, the one word that comes to mind to describe an Elliott Wave Four is nasty.
Experienced equity traders over time, when they have developed the skill to predict and identify wave fours, - will invariably want to trade these waves.
In fact, when wave fours are traded successfully (no easy task), they can earn significant profit in very short periods; something that is highly desirable.
In short, we reiterate our top recent warning, and summarize by strongly suggesting that a potential significant wave four should occur right around the time of the USA mid-term elections.
This is clearly not something any trader will wish to ignore. Even very patient long term investors, will likely find wave fours very unsettling, and a time when significant trading and investing errors can occur.
If our Elliott Wave analysis and forecast is indeed correct, we are now nearing completion of an important three wave up. What is potentially missing now in that wave three, is one last sharp rally. In an ideal wave three world, we may see a double top (another warning mechanism) near the SP 500 price level of 1220 sometime early next week.
The charts today are largely self-explanatory, given our usual education and mark-up comments.
Chart the trend, spot the trend, and go with it.
Sincerely,
James Kelly Sr.,
Editor in Chief
www.KRTT.com
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