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April 2010 issue
© April 16, 2010
data through April 15
A DEADLY BEARISH BIG PICTURE
As far as Elliott waves go, the rally since last March is totally normal. Two weeks off the low of March
2009, our Short Term Update published an upside target of Dow 10,000. So we knew a big rally was coming.
The August issue listed the range for a typical retracement as being from 9368 to 11,620. This is a wide
range, but there is nothing we can do about it; second waves have a lot of leeway. The illustration shown in
that issue is reproduced below alongside an update of market prices. The Dow has so far stayed within the
normal range.
Even so, I expected the rally to peak in the lower half of the target range and then reverse. In August
2009, after 5 months, and in November, after 8 months, I was quite sure that the rally was ending. But
instead of stopping near 10,000 at a 50% retracement, it has reached a 60% retracement. Whenever a market
surprises me, I try to figure out why.
THE OUTLOOk FROm TImE CYCLES
For newer readers, I should reiterate that my view of time cycles is that they are transient epiphenomena
of the Wave Principle. This means that cycles are not the fundamental regulator of stock prices. They merely
show up for a time, like the appearance of the occasional perfect oval in a fractal video. Cycles can be quite
useful for a time. When they disappear, you look for the next “oval.”
Figure 1
Figure 2
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The Elliott Wave Theorist—April 16, 2010
2
For some time, I had tracked a 3.3-year cycle, which was distinct from 1978 to 1997 and then disappeared.
The venerable 4-year cycle was distinct from 1962 to