The Orange labels are the Neely method rules that apply for each monowave since the bottom of October 2002. The Red labels are the interpretations derived from the application of the rules. The cyan labels are the result of my interpretation of the red labels, translated into appropriate Elliott wave counts.
The wave pattern since the bottom coincides with a double FLAT formation. The first FLAT, from 10/02 to 01/04 is an elongated FLAT (A1-B1-C1). B1 retraces less then 80% but more than 61.8% of A1, so it is a B failure. The C1, is longer than 138.2% of B1, and thus it is defined as an elongated flat.
The second FLAT follows an X wave, which occurred at the bottom of 08/04. B2 is less than 80% or A2, to it is also a weak B (as was the first). In fact B2 is almost exactly 61.8% of A2.
If this count is correct, an estimation of wave C2 could prove to be of grave importance. The double flat should be followed by a dramatic counter-trend reversal, and the possible reinitiating of the bear market of the early 2000's. One could make some guesses as to what the wave C2 is going to be, based on the relationship with its predecessors. Neely states: "Fibonacci relationships are more reliable between patterns traveling in the same direction, not opposite directions." We must rely on wave A2 for an estimation of C2.
Wave C in a flat should not exceed wave A by more than 138.2%. If it does, the flat falls into the elongated flat category (this was the case in series A1-B1-C1: an elongated Flat). The most common relationship between A and C in a flat is near equality. The next most likely relationship is 61.8%: This can happen if we have a B failure or a C failure (we already noted that B2 was a 'B failure'). The minimum relationship between A and C is 38.2% (this was already exceeded).
If C2 is most likely to be 100% of A2, our most likely target for the length of C2 equals A2=441. Since the beginning of C2 was 1889, the Nasdaq is likely to climb to 2330 in the present rally (C2), about 230 points from now.
Our next most likely target for the length of C2 is A2x61.8%=272.5 since the beginning of C2 was 1889, the Nasdaq is likely to climb to 2161 in the present rally (C2), about 90 points from now.
If the A2-B2-C2 becomes elongated, C2 should not exceed 161.8% of A, or 581 points, which would set our target at 2470 points or 373 points from now.
If you think that this is too imprecise, I have to agree. However, the conclusion of the double flat will be indicated by an aggressive move in the opposite direction. There are other observations that may give us further clues as to what our most important target should be. In regards to double flat, Neely states: "The channeling [of a double flat] has to be executed using the B-waves [B1 and B2 bottoms] of each flat. When the baseline is broken (if drawn correctly), the pattern should be over." In the chart below, I am highlighting the trend line in RED. Neely also states that the following pattern will probably not completely retrace the Double Flat unless the Double Flat finishes with a "severe" C-wave Failure. However e also states that, A C-Failure pattern is a likely candidate for the last Flat...
(read pages 5-17; 10-4; 11-8; 12-20)
It is of the greatest importance that we recognize a C-failure: it occurs whenever wave-c fails to retrace all of wave B. A C failure will be ruled out if the green horizontal like in the chart below is exceeded. Given this information, we can expect a significant retracement of the entire pattern that began in October 2002, if the red line is crossed before the green line is exceeded.
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