Wednesday, September 14, 2016

Frumpy Dowager

No, of course, we are not talking about Downton Abbey. We're talking about the grand old lady, the Dow Jones Industrial Average herself. And, of course, she seems a bit disagreeable in her old age. What do we mean?

Well, there are a lot of impulse counts upward in the S&P500, of course. And nobody wants to show you the skeleton in the closet: the Dow Jones Industrial Average. Why it's more like the movie of Arsenic and the Old Lace. These bones are rattling.

Here is a chart of the DOW we posted today during live chat.

Downward Overlap in the Dow Jones Industrial Average
So, while a lot of impulse counts are showing a chart like the above, with A = 1, and B = 2, and C = 3, we just calmly and simply note that such a wave 4 would overlap wave 1 at the location marked A, and that is an Elliott Wave rule violation.

So, we won't show it that way! Period.

Now, some people claim the count is really 1-2-i-ii with wave 3 upward about to spring upon us. Well, that may be .. or well .. that remains to be seen. There is certainly no clear evidence to support such a view at this time. It's a bit like betting the old biddy hasn't spent her purse out for a night at the local casino. And that's not our approach to counting waves.

One other thing we note: just like at the Primary III high, the Dow made a picture perfect 1.618 extension of it's Primary I wave, while the S&P traveled a few percent beyond it, here we see the Dow never exceeded it's C = 0.618 x A relationship, while the S&P 500 crept a few points beyond it again.

Stay tuned. Things are getting interesting!

8 comments:

  1. Hi, thanks for your analysis. Can this be counted as ending diagonal and we are currently in wave 4 of ending diagonal.

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    1. Hi. Because the advance / decline line has only turned down on this wave, that means there are no divergences with it yet. So, while it may 'technically' be possible to wave 4 of a diagonal ending here in the DOW (you have to find the zigzags in each, because I can't at first glance from a visual perspective), that count is way down at second alternate, and is not being considered at this time. The 1-2-i-ii, up, would be more in agreement with the adv / dec line, but requires higher highs to seriously activate it.

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  2. Seems to me that you could even count the move in the DOW from the 8/24/15 low to the recent high as an ED. I don't believe that violates any rules.

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    1. See above. I'm not rushing things.

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    2. Understood. I was pointing out a much larger degree ED that would have started at the 8/24/15 low. Of course, the market would have to divebomb for that to be confirmed.

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    3. Can not be counted as a contracting ending diagonal in the DOW from that point because this wave, the wave (3) would be longer than it's wave (1), and that is not allowed in a contracting ending diagonal. In a contracting diagonal, Wave (5) must be less than wave (3), Wave (3) must be less than wave (1), and wave (4) must be less than wave (2), and overlap wave (1). Those are the rules and we will follow them. So, maybe the DOW goes on to form the dreaded megaphone pattern, or the Expanding Ending Diagonal? For that to happen this wave (4) would have to become longer than wave (2), and yet, not drop below wave (2). That is a long way off yet.

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  3. Thanks again, Joe!

    QUESTION: Could we be forming a triangle pattern on the SP500 starting from the low of September 12th to present time? It almost looks like today could have been the "c" wave of a potential triangle. Thanks for your input

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    1. Welcome, Mark. Yes, that is 'one' possibility we discussed in live chart. It would be a 'barrier' triangle in cash, and a contracting triangle in futures. The down leg is 86% in the futures, so the up leg in the futures to 'c' could have a bit more to go.

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