Saturday, October 31, 2015

Halloween Horror

This brief note is aimed at those few hold-outs who will try to argue that if the S&P500 does not make a new all-time high (which it certainly could, yet), then a Primary 5th wave will not have occurred. Like it or not, five Primary waves have occurred, or are still occurring.

Below is the monthly chart of the NQ futures, since the high in 2007. What is most important is that because this contract just made new highs, there is no way under EW Theory to say that a 1-2 lower has been made. This month's high of 4,691, is higher than the prior high at 4,686. A secondary purpose of this chart is to show that (depending on the index) truncations do, indeed, occur. If you review the bottom of this NQ chart in March 2009 - you will note that while the S&P500 Cash Index made the famous new low at 666, the NQ did not come close to making a new low. It's value in March 2009, at Intermediate (5) was 1041, well off the prior low at 1018. How could this be, you scream in glorious Halloween Horror that all indexes don't exactly bottom at exactly the same time?!

Examining this chart, what we see are five primary waves with Primary 2 as a flat, and Primary 4 as a sharp, for excellent alternation, and a new high for Primary 5. (Again, we have not reached a firm conclusion that Primary 5 is done yet.). Futhermore, Primary 4 is in the area of the prior Intermediate (4) - the fourth wave of one lower degree.

The DOW and the S&P500 have now reached over a 78.6% upward retracement of it's Primary 4th downward wave, and that, according to Glen Neely, in Mastering Elliott Wave, is sufficient, to indicate a possible truncation - if it occurs.

The truncation at the March, 2009 lows in the NQ chart above, does not indicate that five waves down 'weren't' made. It merely indicates that this market was 'relatively stronger' than the S&P500 at the time. Similarly, if, for some reason, the S&P500 should not make a new all-time high, which it certainly could, it would not mean it didn't make five primary waves up. It might only mean that it was 'weaker' than the NQ at the time, and that the market indexes are, in fact, still topping at the same time.

Now I know how a lot of people read these things. They tend to say, "well he's saying the S&P500 Index won't make a new high", or "he's making an excuse for the Primary A, Primary B, Primary C count if the new high is not made". Neither of these is correct. I am merely trying to show you how one market index acted at a prior bottom - and that a truncation is the best explanation for it.

Cheers and enjoy the chart!


  1. Thanks again Joe for the post!

    I Always learn from your work. Can't wait for your book to come out.
    Have a great weekend

  2. Thanks Joe!!! Always good to get a "reality check" and keep an open mind. Cheers, AK2