If this pattern is correct, it would be one of “the best” examples of a contracting ending diagonal I have ever seen, besides the one I called on a daily basis that topped on May 15th in the S&P500 index in the U.S. Keep in mind, this is a ‘monthly’ chart. Rarely do you see pure Elliott patterns play out to this degree of perfection on the monthly. But here it is.
What is so perfect? Wave (v) is exactly 50% of wave (iii), wave (iii) is exactly 78.6% of wave (i), wave (iv) is exactly 61.8% of wave (ii) and wave (iv) overlaps wave (i). This constitutes all of the critical dimensions of a diagonal (wave five shorter than three, three shorter than one, four shorter than two, and four overlaps wave one).
|London FTSE - Monthly - Click on Chart to Enlarge|
Uh, oh. If this is the case, then FTSE has topped for a very long time, BUT, and this is critical – what happens if price only retraces to the lower diagonal trend line again on a monthly basis? Would this be ‘enough’ to allow the US Indexes to put on their final high? Let me be clear, I do not know the absolute answer to that question, but there is that very long tailed candle at the bottom of last month. So, if foreign markets do move up again for a month or two, it does seem ‘possible’ at least that the new high is made in US markets.
Cheers and enjoy the chart!