12/12/11

The market went down today.  Except at the end, when it went up.

We bottomed out today at 1227.25, which is a couple points over the 38.2% retracement level (1224-25) for a (b)-wave correction.  It is reasonable to think that this correction could be over, in which case we just started (c) of [y] up - the last hurrah before Minor 3.  Allowing today's low to be the right shoulder of an IHS suggests an upside target of about 1304 - well within the 78.6% correction range of the entire 1370-1074 move.  The 1370-1347 trendline crosses this area in the next couple of weeks.  Again, I would not expect the market to go much higher than 1320, which is where the 1370-56 trendline currently runs through.

On the other hand, the action from Dec. 5-7 looks very much like a topping pattern - desperately trying to make it back above the 200-day moving average, only to be rebuffed by it each time.  The moves on December 6 and 7 are very clearly "three up" from the lows, which is of course the reason why I initially treated the action as a triangle.

Bears should note that the sideways action during this time period can still be treated as a triangle - obviously not (b) now; my previous count was invalidated by movement below 1231.47 - but very possibly "iv" of (a) of [y], or even (iv) of [c/y] of 2, with 1258.25 being the truncated fifth wave of the same action.  This last scenario is the most immediately bearish:  it suggests that we started Minor 3 already.

Finally, it still must be taken into account that 1292 as the Minor 2 high is still a possibility - not only have we not breached it, we have yet to breach the trendline from 1356-47 downward which touched 1292 and the tip of the more-or-less horizontal top at 1266-67. 

The argument against is that the move from 1292 to 1158 looks blatantly like a "three" (which is why my primary count is still bullish near-term), but it could theoretically be Minuette (i) of a leading-diagonal Minute [i].  Yes, LD's are supposed to be 5-3-5-3-5... and you should have shorted silver at $20/ounce.  If this does happen to be the case, Minuette (ii) is over, Santa is your parents, and prepare for a move down to at least the lower 1100s.