October 29th, 2009 by 
The S&P 500 finished today with another close higher after 4 previous down days in a row.
It seems every other day the news changes course and the market swings back and forth, not knowing which way it should continue.
The one thing that is certain from looking at the chart below is that the angle of ascent is slowly decreasing. Ever heard the term “roll over”?
Take a look at the four most recent lows I have identified on the chart below (L). Each consecutive low has been closer to the 50 day Moving Average line than its prior low, with the prior low bouncing off the line and the most recent low penetrating down through it before moving back above it today.
In addition, you can see that I have added a lower support line connecting these 4 recent lows, which should provide a good additional signal in the future if broken through down lower.
It’s fascinating to see that each of these 4 prior lows consisted of very similar patterns immediately prior to the lows. That being, each pattern from the high immediately prior to each low (H) has a clearly recognizable 3 wave pattern before ending at the low and reversing.
For those of you who don’t know, a 3 wave pattern is most often associated with a counter-trend move. Meaning, against the next larger degree trend. In this case, that trend has been up since March 2009.
How does this help us? Well, another type of wave pattern is a 5 wave pattern. The 5 wave pattern is not associated with a counter-trend move, instead it can be associated most often with a directional trend move.
Note: To learn more about identifying wave patterns and keep up with the current market position and future forecast, take a look at my page on the Elliott Wave Financial Forecast Service or watch the free videos accessible in the right column of this page under “Elliott Wave”.
As the current position of the S&P 500 displayed on the daily chart above evolves, any considerable move, and close, back lower through yesterdays low of 1042.19 could easily be interpreted as 5 waves down from the recent market top.
This would not be the same as the previous 3 lows on the chart which had 3 waves down. Instead, this would raise the odds that a next larger degree trend change was underway, down.
