Wednesday, February 19, 2014

The A-B-C Correction:

The A-B-C correction typically follows an Elliott Wave five wave bull phase. When I count waves on many stock sectors from the September 2011 lows I get a completed 5-wave count and so I can now assume a typical A-B-C type corrective period to follow.

Just to review the structure of an Elliott A-B-C

Wave A is a downward move that comes “out of no where.” – The fundamentals continue to improve and investor psychology goes from very bullish to moderately bullish.  They do not believe a new bear market has arrived  

Wave B is a “phoney rally.” - Normally weaker technically and the fundamentals sometimes start to weaken, sometimes not. Investor psychology goes from slightly bullish to very bullish, usually more bullish than it was at the top, creating a negative divergence between momentum and sentiment... This is the most reliable sell point

Wave C is the “killer wave.” Being a serious down trend with serious losses and deteriorating fundamentals. Investor psychology goes from very bullish to very bearish.

A final note on the C wave – it is the longest wave and it can subdivide into five smaller waves. The chart is the Dow Transports and my best guess for a downside target is the 200 day MA currently at about 6755 on the index (Average) Other sector worries would be the SPDR Financials and the Russell 2000 – have fun.


Anonymous said...

so Bill, how relative will be the performance of XMA to a pending broader index correction. Per your earlier post, will XMA correct less than XIU (or not at all) given its relative strength.

Anonymous said...

Scary stuff! So we should sell then?

As an aside, can only Google Account people leave their identity? said...


The pending C wave down on the broader US stock indices is still very likely to get underway - I still like the XMA due to its past inverse relationship to the S&P500

Bill Carrigan

sibeiho said...

Is it still a valid B wave at the moment?

sibeiho said...

Is this still a valid B wave? said...


Yes still a valid B wave - but the next five days will be the test

Bill C