Elliott Wave Stock Market Forecast - May 7, 2006

Although the DJIA continued this past week to lead most indices to new highs for the year, our operative wave count remains the same, i.e, a top is forming and the next decline should break below the trendline that has supported the market after each short term decline this year. Our wave count suggests that wave c' of c of (b) of B is in its final topping phase. The next selloff will be either wave (c) of B, or alternatively, wave d, if wave (b) is not yet complete. The extent of the decline will depend on whether wave (b)'s pattern is complete, i.e., whether it extends and develops into a horizontal triangle pattern (a wave d decline would be much less severe then a wave (c) decline...both in terms of price and time). Elliott Wave Charts and further analysis can be found here.