I think I'm following, but wave 1 of...what exactly? What comes after $491? Is the wave 2 a down wave that drops below the bottom of this one in your opinion?
Wave-2 is the corrective wave to wave-1. Each wave (1, 3 and 5) is made up of 5 smaller sub-waves. This is the fractal nature of EW. To make up this wave-V (roman numeral 5) we need to make 5 sub-waves (1, 2, 3, 4 and 5). We have completed 1 and are working on 2. The actual bottom will indeed be below this low.
The legend of my charts is as follows:
In most cases I will use only 3 degrees of labels. Upper case Roman numerals, digits, and lower case Roman numerals. However, in some cases I will use parenthesis or brackets to show a larger degree wave when I need to have 4 or more degrees labeled.
A little psychology of EW:
Wave-1 is usually fairly weak since people believe the previous trend is still in effect. Since we had a few days of sideways movement, people think that the downtrend is over so they are reluctant to follow the new direction, in this case down. We will get this pull-back and these same people will also think "to do moon" until it turns far before liftoff. This is when the realization comes to light. "Oh, shit! We aren't going to da moon,we are going down..." This urgency is what makes 3rd waves the most powerful. The opposite thoughts also inhabit the mind in up trends.
I hope this all helps!
) in nature. It was more of just plain old, panic driven irrationality... A reaction to the fall back to Earth. That was the first time we were ever above $32 let alone in the Hundreds! Traders wanted to take some profit off the table and were NOT going to miss those prices.
