Beware the "C of C Wave" Avalanche

“What the hell are you doing!?” Someone yelled a few minutes after I went short the euro. Luckily, he wasn’t yelling at me. He was yelling at the guy behind me who’d just gone long the euro.

“Why are you fading a C of C wave!” He continued on his tirade. “That’s like walking up a mountain during an avalanche! You’re gonna get buried.”

This “C of C wave” is a component of Elliott Wave Theory. It can be the most vicious phase of a corrective selloff.

I tell you this today… because we’re now in this very phase.

See larger image

Looking at the chart above, the red bars show the first major wave down – the “A wave.” This impulsive wave has five sub-waves (labeled with lowercase a – e).

The “B wave” is in yellow. This is when the selloff takes a breather and prices go back up a bit. This wave is corrective and only has three sub-waves (a – c).

And then the “C wave” is in pink. This impulsive wave also has five sub-waves (a – e). Of these, the “C of C wave” is the one to watch out for.

If this pattern plays out in its textbook form, the S&P 500 is headed to 1,230 next. Then, after a small upward bounce, down to 1,200 or lower.

Stock buyer beware!

If you haven’t done so already read the Survive & Prosper issue on “Pensioners, Welcome to Ben Bernanke House of Pain“.

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Categories: Economy

About Author

Adam O'Dell has one purpose in mind: to find and bring to subscribers investment opportunities that return the maximum profit with the minimum risk. Adam has worked as a Prop Trader for a spot Forex firm. While there, he learned the fundamentals of trading in the world’s largest market. He excelled at trading the volatile currency markets by seeking out low-risk entry points for trades with high profit potential. An MBA graduate and Affiliate Member of the Market Technicians Association, Adam is a lifelong student of the markets. He is editor of our hugely successful trading service, Cycle 9 Alert.