Have we been deceived?

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Geometric Thinking Update

By Jim Fredrickson

I posted an update to the last blog, in which I acknowledged that my faith in my wave count had been sorely tested by the rally, which flew in the face of the selling I had forecasted.

But at the risk of sounding like a vain old man who can’t admit he was wrong, I want to point out that the market has still not proven that the underlying count was wrong.  It merely proved that the wave was not a diagonal.  It could still have been an ABC.

I just can’t ignore that the rally from mid-December (circled) looks like a 3  –  not a 5.  If that was the start of a bull market, EW suggests we should see 5 waves up, not 3.  Three waves is characteristic of a counter trend rally.  And, if you will notice, even the powerful rally of the past 2 days is still showing only 3 waves up.  (That could change if we get one more clear wave up.  We will know that within a day or two I suspect)

“I just can’t ignore that the rally from mid-December (circled) looks like a 3  –  not a 5. “

This remains a possible wave-count.  If this is correct, The rally is just about over.  I’ll be honest and say that I do not yet know if this the true state of the market.  If it is though, the market has set up us up with a tremendous false breakout.  We will see soon enough.

Here is a setup on the BTC60 chart, which suggests the possibility that the ride is over.  If you look closely, you will note that there are no clear 5 waves up visible here either, with the possible exception of the rise from the middle of the setup to the end.  But if that is a wave 3, where is wave 1? The move prior to that rally does not show, imho, a clear wave 1 and 2…

Elliott Wave counters will be reminded that C waves, like impulse waves, end in 5 waves.  That might be what we are seeing here.

In conclusion

I do not know if this is a true breakout, or a false breakout yet.  I suspect we will know for certain within just a couple more days.  One thing to watch is the current retracement.  If the market support in the highlighted range above breaks, convincingly,  it might behoove us to consider the possibility that the mother-of-all fake-outs was thrown at us.

We will see soon enough…

This is not financial advice, just words of wisdom from someone who has seen it all over the past few decades.  Do with it what you will.  Happy Trading!

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