12/3/20087:41 PM Pacific

I have a definite bias that the structure up is corrective. I have labeled it in great detail to illustrate this. Yes, I can study a higher level of degree and count out a rough, complex motive wave, but there is a higher degree of probability that this wave up is corrective. A wave should work on all levels with only minor rule breaks. A motive wave doesn’t work at this level of degree. The probability that this is corrective doesn’t mean we can’t go higher, but it does mean we shouldn’t go higher than the wave we are correcting, that is the wave set down from 11/30. The high probability that this wave is corrective also implies that the 11/30 wave set down is 5 waves instead of 3. Crossing over 865 certainly fired off a lot of stops that gave price a short-term nitrous oxide boost, but it was premature to call a bias change to a motive wave.

12/3/20087:41 PM Pacific

Corrective waves can be very complex. You can’t have more than 2 extensions in a set (3 total), but a big retracement can separate smaller wave sets creating a wave set of a larger degree which can also be 3 combinations. Two combinations are the most common and wave sets of a larger degree are usually balanced (e.g., doubles on each side). I failed to properly count the a-b-c up from x in the double zigzag I labeled earlier today which caused me to include the wave of the next set in the pattern (B –a). I have corrected it in the version above. Fibonacci levels play a key role in identifying corrections and also contributed to my double zigzag call at the .618 retracement level. Fibonacci .500 and .618 retracement levels are heavily watched and traded, and yet, it doesn’t seem to diminish their effectiveness. Of course, the futures add a degree of complexity that often isn’t necessary to interpret what is going on. In fact, a look at 60 minute cash today would have cleared things up for me.

That is a pretty clean double zigzag that we ended on. DOH! So, the futures look like we could have one more wave up to balance things out, the cash looks balanced and done.

12/3/20087:41 PM Pacific

Hopefully this is the last time I make an adjustment to forecasting this next pattern. The rise higher today gave the 1:1 ratio extension of the 5 waves down a little more room to complete. 792 is the target if we correct without going higher, just past the .618 retracement of the move off the low. I am also showing a confluence from the .810 retracement of the 5 waves down (just overhead) in the event we tick up a bit before descending. A .618 extension is still possible and would not extend beyond the 5 waves down.

The next chart is in case my bias is (painfully) wrong and we make a new high. Price should work to this level before a significant correction.

12/3/20087:41 PM Pacific

TMD/DW The market detective provides personal market opinion based on sound technical analysis and research. However, no warranty is given or implied as to its true reliability. The market detective will make errors and mistakes. The market detective is not an investment adviser and is not making recommendations to buy, sell, or place orders relating to the futures contracts, ETFs, or stocks that he writes about. The responsibility for decisions made from information contained in this service are solely that of the individual subscriber. The individual must fully research and make his/her own decisions before acting on any information provided by the market detective. The market detective assumes no responsibility for subscriber investment or trading results.