Stock Market Broadening Formation Wave structure now agrees with the Cycle

By: Anthony_Cherniawski

The market has morphed yet again, but the Broadening Formation is providing a structure within which we may interpret these moves.

The VIX offers us the clearest picture of the wave structure. It is ironic that today’s Elliott Wave label happens to be a “Cycle Wave 2” at a major cyclical low.

Although today’s high has not exceeded the August 31 high, it still qualifies as a “point 5” within the Broadening Formation and provides ample explanation for the lack of impulsiveness in the most recent decline. The Broadening Formation also gives us clear guidelines for the next series of waves, which will begin the crash phase of the market. “Point 5s” may or may not exceed the peak at point 3 (1230.71). In fact, those point 5s that fail to exceed the last touch of the upper trendline indicate that the probability of violating the lower trendline is immediately 80%. The violation of the lower trendline raises the probability of a successful go at the downside target to 96%.

I have not inserted the Broadening Top labels so that they would not be confused with the Elliott Wave labels. There are several variations to this theme, but the big item is the proliferation of zig zags moves that are enough to make a trader dizzy.

The NDX is a little easier to follow, but still very corrective. I will be glad when this affair is over. Time is running short for this rally.

Regards,

Tony

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