Sunday, January 30, 2011

The A-B-C Correction

The A-B-C correction is an Elliott Wave pattern that follows a 5-wave Elliott Wave advance – to simplify we get three legs up and two legs down. The A-B-C correction can vary in structure with some flat and others deep and nasty. The correction will usually begin at the peak of the 50-day moving average with the A wave down breaking under the 50 and stopping at support at the 200 day MA. The subsequent recovery B wave fails to make a new high (swing failure) and the following down C wave breaks under support at the 200 day MA and the selling can get nasty 

Forget about that 50 and 200 day crossover stuff with the golden cross being a bullish signal where the shorter 50 day moving average moves above the longer 200 day moving average. This is the opposite of the death cross - a signal where the shorter moving average moves below the longer moving average. By the time the “cross” occurs the move is almost over!    

Currently a number of important stock groups and indices are completing the B recovery wave and setting the beginning of a C wave – once again I don’t have access to my own charting software so I have to poach from but we can see the daily Dow Transports just beginning the C wave at the 50 day MA and that 200 day at 5056 is a long way down


Anonymous said...

on the transport chart, is the 200 day moving average at 5056? said...

Hello Anonymous

The Dow Trans @5055 is just under the 50 day (5100) but still above the 200 day of about 4600 - next week will be important

Bill C