January 12th Update

Crude

I have to start with crude, since that was by far the most interesting development today.  Crude made a sudden large downside reversal today, ending the day down 1.89%.  I'll be honest and admit that this move caught me completely by surprise.  As it is, I have no position in crude, but I've been following it closely trying to get a working wave count on both intra-day and daily time frames.

Whenever you get a powerful move like this in either direction, odds are you are in an impulse wave.  So I have thrown all my old counts out the window and started over with the daily time frame.

First, lets assume for the moment that the rally higher from 12/16 to 12/27 was a five wave impulse wave.  It defines the larger trend as still up (unless it was a truncated fifth, but those are rare so let's put that aside for the moment), but it fails to make a new high over the prior third wave at 103.48.  Therefore I'll label it as minor wave 1 of (5).  After a small correction price rallied up to new highs in three waves.  Today's sell-off pretty much invalidates any possibility of a diagonal fifth, so my assumption is that minor wave 2 of (5) is still unfolding, and will be an expanded flat formation.  In other words, an a-b-c correction where the b-wave makes a new price extreme, in this case, higher (see my education page for details on flats).  I've labeled minute wave ((b)) completing on 1/4 at 103.74.  So we potentially have an ((a)) and a ((b)), and still need ((c)), which will be a five wave impulse.  
Assuming this count is correct, we can predict where minute wave ((c)) is likely to end.  Second waves commonly retrace most of the prior move, and fibonacci retracements of 61.8% and 78.6% are very common.  I have both of those on the chart.  Also, waves A and C typically are related by a fibonacci  level.  In an expanded flat, such as this, the C-wave will typically be longer than the A-wave since the C-wave normally effects a deeper net retracement.  Therefore, I've put 1.618% and 2.618% relationships on the chart, as ((c)) would relate to ((a)).  
As you can see, the 2.618% ((c)) extension and the 78.6% retracement of minor wave 1 form a nearly perfect cluster.  Therefore, minute wave ((c)) and therefore minor wave 2 will likely end around 94.45.

Summary:  Today's sharp drop alerted me to a high probability third wave in progress.   After doing some analysis, I've determined this is likely a subminuette wave iii of (iii) of ((c)) down, which will find it's ultimate termination somewhere around 94.45.  We'll see how this all plays out, but for now I'm still intermediate term bullish crude, despite today's turn of events.

 SLV and GDX

I have short positions in both of these.  Silver futures completed a five wave impulse up this morning at the top of the linear regression channel.  GDX also made another run to the top of its linear regression channel, completing a (w)-(x)-(y)-(x)-(z) corrective combination to the upside. 

My short positions in both of these was established Tuesday morning, and despite today's intra-day new highs, I remain convinced these are both about to roll over.


Equity markets


I continue to rejoice that I have no position in the equity markets, because the wave count is anything but clear.  Still, it's fun to try and figure out what it's doing, even if I won't act upon it.  This is definitely a situation where I would wait for clear signs of a trend change before taking a position, rather than try and pick a high probability short term top as I often do.

You can see from the chart above that the move down from 12/7 to 12/19 met pretty much all the rules for an impulse wave, yet it has been fully retraced and exceeded to the upside, invalidating an impulse wave.  Therefore, I have tentatively relabeled it as an a-b-c (in red, but not labeled), followed by an (a)-(b) with (b) making a new low.  This is not ideal, but I cannot come up with a better label at this time.  Additionally, since the market continues to grind higher, despite what appears to be a completed five wave pattern for (c) (ending on 1/3), my assumption is that it's a corrective combination ((w))-((x))-((y)) at minimum.  In this case, the final ((y)) would be composed of an (a)-(b)-(c) of which only have an (a) and the start of (b) so far.

Anyway, these labels are only my best guess, and there is plenty of head scratching going on.  Instead of getting caught up in all the minutia here, it's important to remember that these are still three-wave corrective moves, and that the five wave impulse down from May 2 high is still dictating that the larger trend is down.  Shorter term, however, we have a rising linear regression channel on the daily chart, so why fight it?