Friday, September 23, 2016

Best Ways of Counting the Down Move

Below are the best ways of counting the SP500, and Dow Jones Industrial cash indexes so that they "sync" at the lows. The DOW is very straight-forward. It counts as an ending contracting diagonal down to the 14 September low, as follows.

Ending Contracting Diagonal in the DJIA to the New Low on 14 Sep

This count currently fits all the rules and guidelines in that (red count) wave (v) is shorter than wave (iii), wave (iii) is shorter than wave (i), wave (iv) is shorter than (ii), and wave (iv) overlaps wave (i), and they are all zigzag waves. This diagonal, as you now know, has also been more than fully retraced. 

Our issue, as we reported in this blog, was that it wave very difficult to count the strong down wave in the S&P500 as the C wave in and of itself. It turns out we were looking so hard for a triangle in the SP500, we missed it! And it was there all along. Here it is in the next chart.

Triangle in the SP500 Index Before Truncation Wave v, and v = i

So, after all, we did have an acceptably formed barrier triangle, and it was validated with the (e) wave trading back up over the prior wave iii, as required. The only issue is the SP500 truncated slightly, and did not make a new low like the DOW, NYA, and Wilsh 5000. But, if you look at how long the wave iii is, it is a near perfect Fibonacci 6.86 x wave i, then such a fifth wave downward is certainly allowed to truncate - which it did, and only slightly.

The overall point is that both indexes can indeed be counted as A-B-C down in a zigzag. Remember that only zigzags are allowed for waves (1), (2), (3), (4), and (5) of a diagonal count. It even turns out if you don't like the ending diagonal on the half-hourly DJIA (maybe the retrace wasn't fast enough for you), then, because of the rules of barrier triangles, the DOW can also be counted in the same barrier triangle as the S&P500. In the DOW, there were no new closing lows over the low of wave iii, until the exit from the alternate barrier triangle count!

It is very likely, then, that the following waves in the half-hourly charts, above, are i, ii, and iii of the A wave up of Intermediate (3) in the diagonal count. Usually the A wave in diagonals appears near the highs - but not always. So, this manner of counting allows that, as well.

So, here is the two-day diagonal count shown on the DOW, with the A wave up, in progress.

Progress of the Potential Contracting Diagonal in the Two-Day DJIA

This is the count that currently fits the waves the best at this point, and it also fits with a Primary V scenario. A Primary Vth wave should have the lowest momentum of the prior waves. The wave also has the right look at this point in time. This also means that wave (3) can take up quite a bit more time, yet, and make marginal new highs. However, in terms of time signature, wave (3) should be shorter in time than wave (1).

Is there an alternate? It is 'possible' a smaller first wave up, (i) of a iii in the 1-2-i-ii-iii count upward has started. But the alternate count has little evidence going for it yet, as strong acceleration to the upside would be needed for what would be (iii) of iii, and we haven't seen that yet.

Cheers, hope this helps, and enjoy the weekend!


  1. TJ you are not consider a triangle for 4th for SP...a completed to 2120s and b to 2180s and now c?

    1. No Jack .. I only have three waves down to (2), not five.

  2. yes i was suggesting those 3 made the first A (instead of (2) and then now we completed B again in 3 waves to 2180ish and now starting the C of triangle..then followed by d and e..well lets see how things evovle- these waves are very subjective at the moment - head spinning;)

  3. Hi I'm new to your blog but like the way you are so meticulous about your wave counts. Since the May'15 top I've had a count for the DJIA (which I trade) and the S&P500. It is at complete odds with everyone else that I've seen....including yours but I would very much like your opinion on it if you will oblige.

    Here's the DJIA count:

    1. ...and here is the S&P500 equivalent.

      Thanks very much