|After writing the previous article about the Standard & Poor's 500, I thought I would have a look at a bar chart rather than a candlestick chart. When I did this, the a-b pattern within a wave 3 hit me. This is a pattern I often saw when I was a chartist in South Africa, a pattern I have rarely seen in the US market. The pattern is not found in "The Elliott Wave Principle" by Robert Prechter. I did mention this pattern when I wrote an article about Elliott wave theory for STOCKS & COMMODITIES magazine.|
|FIGURE 1: S&P 500 BAR CHART|
|Graphic provided by: AdvancedGET.|
|In Figure 1, note that the a-b correction is close to the middle of wave III. Note also that the current correction is testing the support line drawn from the low of wave II. Once again, note that the relative strength index (RSI) is close to giving a buy signal.|
The beauty of this Elliott wave count is that wave III is greater than wave I, which is the way it must be. This does mean we can now expect a wave V up? A wave V should be equal to wave I, which means that wave V should top out at 1389 (1128 - 1011 = 117 + 1272 = 1389).
Finally, note that the chart follows the first rule of Elliott wave, namely the chart must look right. This one definitely does.
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