Thursday, October 1, 2015

Fifth Waves

Fifth waves of impulses, lower, have a distinct tendency to end at the median lines of their channels. This represents the "loss of momentum" that helps identify them as fifth waves, distinct from third waves. This chart shows a plausible count for minor wave 5 in the form of a contracting ending diagonal. Such a count would allow the fifth wave to 'begrudgingly' make a new lower low beneath minor wave 3. Diagonals are very difficult to count, and even more difficult to trade. The whipsaws within them are what helps keep the public out of the market at key turning points.

Possible Ending Contracting Diagonal for Wave 5

While we can not guarantee even to ourselves that such a count 'will' come true, all we can say is that it is a 'very good possibility' based on the current information. Part of that information is that this morning cash failed at the back-test line of the upward bullish flag that formed minor wave 4. Of course, the day isn't over yet, so we must be responsive to what the market dictates. That said, we can not find a downward triangle of large enough degree to have ended the downward count. Such a triangle, if sufficiently large, would have said 'last wave downward upcoming'. Again, we don't see such a triangle.

In this count wave minute v must be shorter than minute iii, wave minute iii must be shorter than minute i, minute iv must be shorter than minute ii, minute iv must overlap minute i, and there must be all 'three wave' sequences.

This is 'not' the only downward count possible from this location. Another possibility would be that of a 'expanding' diagonal for wave 5, as well, but there is less price evidence for that count at this point. That possibility could form if there is a surprising positive reaction to the upcoming payroll employment report on Friday.

Cheers! and enjoy the chart.

1 comment:

  1. Thanks Joe! Great post and much appreciated

    Mark Alan