Prechter World gets on a roll during times like this - the wave pattern is easier to discern when impulsive. Last night's STU proferred more evidence of one of their core claims, that the Fed follows the market on rates, does not lead. Check out the chart - it speaks for itself. For all you Prechter bashers, the service provides counter-intuitive insights such as this which are worth their weight in gold - your gold if you can separate their wishful calls (see my prior Wolf! Wolf! series) and their broader insights.
Also, we are gaining clarity on how to count the market since July. The wave down from Oct07 counts as five waves if we look past the Dow - the Jan22 bottom was wave 3, the Mar17 low was wave 5. It looks less clear in the Dow, but sometimes waves 5 truncate, especially when something happens as happened on Mar17 - the Fed forced a workout of Bear Stearns and avoided financial gridlock. I wouldn't call this a bailout as Bear got sold for scrap; it was more a pre-packaged bankruptcy without all the complexity of a court proceeding.
Does this mean we are in wave 1 of the Big One down? Not necessarily. Just as the Mar17 bottom is not the low point in the Dow, the Oct top is not necessarily the top even though it was higher than July. In other indexes this count is clearer: if July is the top, wave A and B were the down/up to Oct, then wave C is the five waves to Mar17. This would be a classic Zigzag pattern; caveat that the wave off of July is easier to count as a 3 than a 5. (Zigzags break 5-3-5). I will let strict Elliotticians parse this for us - please comment.
Obviously the key level to watch is the Mar17 low. If we fail to break it, the odds increase that the market has been in a bottoming process since Jan and is preparing to rise again into 2009. But the EWI analysis is making a stronger case that we will break it. Imagine that (a) oil spikes well above $140 towards $160/bbl, (b) Fed raises rates, and (c) inflation fears run rampant. Neely stated today he is almost "certain" that his Big One is upon us.