Thursday, October 8, 2015

The Fourth Degree

When you ask someone for some information - if you do not inquire politely enough - it is sometimes referred to as giving them "the third degree". Politely or not, can we inquire as to where the market is in it's hourly count? In Tuesday's post, we clearly said that if the Dow made a higher high than the September high, then it would officially take all downward diagonals off of the table. Yesterday, the Dow did that, and in live chat room, and elsewhere, we removed the downward diagonal possibility and upped the odds of a Primary fourth wave in progress. We are currently at 70:30, that a Primary 4th wave is in progress.

We have shown in our weekend video, that if we are to make a Primary fourth wave triangle, there needs to be a clear Intermediate (B) wave up, that would start with a minor wave A. Originally, we were looking for a Leading Diagonal, upward. The first attempt at that count invalidated at two different levels. But, because of the look of the Dow's chart, in particular, and the position of the Bollinger Bands on the S&P 500, we are putting a Leading Diagonal Minor wave A back on the table.

In the chart below, you can see the S&P 500 has not yet made the higher high, but we would expect it to. Yet, the question is, can we better tell where we are in the hourly count? One key might be a structure in the 'fourth degree' .. well in the fourth wave position. If you examine this chart closely, you can see a structure that we have clearly labeled as a five-wave triangle (A,B,C,D,E,) and wave iv.

(More text below chart).
Triangle in Fourth Wave Position of wave iii

If the triangle is properly located in a wave iv, then it should precede the 'last wave up' in this wave sequence. Assuming a new high is made, then it is very possibly wave minute iii of such a Leading Diagonal. Since we never did count the September downward sequence as a 'five' and only as a 'three', then a diagonal structure can, in fact, still be on the table.

Of course, the requirements remain the same as for all diagonals. Minute wave iii (circle iii) must remain smaller than minute wave i, and minute wave iv must remain smaller than minute wave ii. Minute wave iv must then overlap minute wave i, in the downward direction, and minute wave v, up, must remain smaller than minute wave iii.

With further upward movement the Dow will overlap it's first downward minor wave (minor wave A).

See chart below.
Daily Dow Could Upwardly Overlap

If the overlap occurs, it may be enough to only consider the upward movement as a simpler W-X-Y of Intermediate (B) rather than requiring a full Leading Diagonal would form. So, we have clearly labeled this alternate count on the S&P 500. But, note the position of the daily slow stochastic being in over-bought territory.

The Dow's downward retrace in September was nowhere near as deep as the SP500's. Because the two counts are not in lock-step, it may be necessary for the S&P 500 to form a Leading Diagonal in order to effect a legitimate first wave higher, minor A. Whether a leading diagonal or W-X-Y, the market will have to tell us through valid formations which count is in play. In either case, the upward diagonal possibility would invalidate below the respective September lows.


  1. Joe! I love this blog! Simple yet extremely informative.

    Thanks for your work and sharing!

  2. Appreciate the comment and the enthusiasm very much!