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The April 9 rally was most likely green W-1/a, and the following seven days to this Monday’s low were green W-2/b. Now, the green W-3/c should be underway to ideally ~$21,400. Since 3rd and C-waves comprise five waves, we expect it to subdivide into the five grey waves i-ii-iii-iv-v as shown. However, we must see a breakout above the April 9 high (dotted green horizontal line) to confirm this path.
Three versus Five
This brings us to the next issue. As we pointed out in our last update,
“… financial markets are stochastic and probabilistic, i.e., they follow if-then scenarios, and thus, those who seek certainty will never stop searching; we cannot yet be sure which path the index will take.”
Thus, we cannot know at this stage if we will get five (green) waves up (1-5) or only three (a-b-c). Hence, why must we label the current advance 1/a, 2/b, 3/c, 4?, 5? Once the W-3/c is completed, we can determine whether the 4-5 sequence will materialize based on objective price levels. However, due to the recent rallies since April 8, which overlapped with the early March (red W-a) low, we know that the decline from the February high into the April low was only three waves: red W-a, -b, and -c, and thus corrective. See Figure 2 below.
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