Saturday, November 14, 2015

Implications of Overlap

The charts below show that two US Equity Indexes have now done something which, in the Elliott Wave world, is to be noted. That is that the New York Composite Index and the Russell 2000 Index have now overlapped the upward wave from the end of August, 2015 in the downward direction.

In each case, this overlap is shown as an arrow on the charts below. The implications for these indexes is that the downward wave can not now be a wave four of an impulse wave upward, precisely because, as you probably know, in an impulse wave the fourth wave is not allowed to overlap the first wave - especially on a closing basis. Now, we want to emphasize that for the Dow and the S&P500 there has not yet been such an overlap. But, if there was to be, then these indexes would fall into that same category - so keep a close eye on them.

This means that in these indexes, at least, one could look to some of the structures we provided in our October 10 post, "A Hitch-Hiker's Guide to the EW Galaxy", and in posts more recent than that. Again, we want to emphasize that precisely because the S&P500 is the "most-levered index", with the ES E-mini futures providing over ten times the volume as on the Dow Jones or London FTSE futures, that almost anything is still possible for the S&P500, in particular. We are going to know in the next few days and weeks whether upward impulse counting is still possible on that index. Our key concern is that the position of the above indexes, however, provide a significant warning sign. And so, for our part, we will remain patient, pending further information.

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