Correction

In my last post, I stated that Wave 3 was the most powerful of the waves. This is incorrect. While it sometimes feels like this, the actual rule is that Wave 3 is never the shortest out of Waves 1, 3, and 5, on any timeframe. Also, more generally, these past couple of weeks have demonstrated that there are always alternative Elliott Wave counts, and it doesn't pay to be overly reliant on a particular count. So let's take a look at other aspects of the market.

Market action the past few days has certainly been bullish. Watching the tape, I've noticed that buyers have been quick to get in on any pullback. For example, what began as a Friday afternoon selloff at 2:30PM actually ended up as new highs on the day. This suggests that market participants don't want to risk missing out or being caught with short positions over the weekend. Up until now, people didn't want to risk being caught long over the weekend! Meanwhile the drops in the VIX, gold and bonds suggest increased risk appetite. However, among these encouraging signs, one note of caution is the gap between Wednesday's close and Thursday's open: An overwhelming majority of gaps eventually get filled, and most of these get filled immediately. They're like little black holes; it takes great strength to resist the pull. Conversely, the ability to resist the pull implies great strength. I'm impressed by how the gap was defended on Friday; prices dipped a toe into it, but that was it. It's a virtual guarantee that this gap will get filled eventually; in the short term, it puts a bit of pressure on the bulls to forge upward quickly.

PS: Check out that strong 3-day bounce off the 50-day moving average (blue line)!