Thursday’s, April 13th, 2017, trading displayed some evidence of “exhaustive selling”. It is still trading well above its 200 – simple moving day average. The BULLISH RALLY has not stopped.
In identical occurrences, based on historical data, the one-month returns, during which the SPX rallied 15 out of 16 times with a greater than 5-to-1 reward-to-risk ratio. “Emotional selloffs” occur in strong uptrends which have only presented themselves with greater buying opportunities. This is the predominate case we are facing during this month of April.
Wave A is the first of three waves in the corrective phase. Corrections are almost always more difficult to identify than impulse waves and most investors confuse them as interim corrections. Volume might increase in Wave A and volatility will also rise, although not nearly enough to imply a bottom.
Wave B tends to be the most difficult to identify. The volume of Wave B tends to be lower than that of Wave A. Wave B will consist of three sub waves and should retrace at least .62 percent of Wave A.
Wave C is often very impulsive and marks end of the current corrective phase. Volume may be higher in Wave C than in Wave A. Wave C is made up of five sub waves and terminates beyond the end of Wave A. Some studies suggest that Wave C should not continue beyond 1.618 times Wave A, but this is not a rule