Friday, September 9, 2016

Running Triangle Invalidated

We said in yesterday's post, that there was one last invalidation point for a "running triangle". That was the circle-c wave in the hourly chart. That invalidation point was cracked lower in the last couple of hours. We have always stated that the triangle and diagonals are forms that must prove themselves, and the triangle disproved itself this morning.

The good news is in live chat last night, we said we could 'likely expect a gap down opening - although there were no guarantees', and that is exactly what happened. So, we were at least headed in the right direction.

We have since reviewed many other counts including a) a triple combination - w-x-y-x-z - sideways wave that would have the same internal structure as a triangle, but that does not have the 'right look' because the x waves are not nearly equal in height. b) expanding triangle, but the problem here is now there would be two complex legs to such a triangle, and so, that is being ruled out too.

So, now when we recognize price is back below the C = 0.618 x A relationship we have spoken about in prior posts, we think the contracting diagonal scenario we said for all of Primary V makes the most sense. He is a picture of it on a three-day chart of the SP500.

Ending Contracting Diagonal in SP500 - 3 Day Chart

We think this is the count that matches best with the position of the Advance / Decline line at all time highs, and the fact that the Dow and SP500 broke through their all time highs.

This count utilizes the very slight truncation that we said was possible with the hourly chart, in our previous posts. A key to this count would be overlap of the minute b (circle-b) wave lower, and then Minor A lower.

The strength of this count is that is gives an exact accounting for degree labeling. We would now know almost 'for sure' that the August high was Intermediate wave (1) of Primary V, and zigzags would be expected for Intermediate waves (2), and (4). When price reached Intermediate wave (5), the up trend and entire bull market would be over.

We again completely admit to being wrong about the potential triangle - even though the wave signatures were there, and it was a reasonable count. But the count was incorrect for all of two hours!

Let's see if this count proceeds as expected. Again, a contracting diagonal must prove itself. But remember, we said from the time we broke out of Primary IV, that Primary V could occur as an impulse or a diagonal, and we had no preference as to either. If we get the diagonal, it should make wave counting much simpler going forward.



14 comments:

  1. Replies
    1. Welcome Mark, and thanks for the continued support!

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  2. I guess the alternative is nested 1-2s

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    1. Right in some regards. The 1-2-i-ii is the usual alternate for a diagonal. But we have to see how it plays out. What puts the nested 1-2s clearly in the alternate camp for me is the truncation.

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  3. Joe, for what it's worth . . . to my eyes the tone of your commentary has improved greatly compared to your posts on Caldaro's site. Your posts here possess greater clarity and less defensiveness. That was a harsh and overly critical environment, full of commentors who want easy answers and don't know how to deal with the ambiguity of multiple wave counts. I'm enjoying your voice here.

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    1. Thanks, and I'll offer some additional commentary on OEW at a later date.

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  4. Much appreciated....great work as always

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  5. Thanks Joe for your detailed, studied and comprehensive analysis that you share gratis with whoever is fortunate to click on your blog. You always warn that every wave you count out that forms a pattern must form correctly. And, when it doesn't form in the proper manner you are quick to make that known to your viewers and give us the best count that does, so as not to leave us hanging. It's great stuff!

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  6. Why such a short time frame projection for waves 2,3,4 and 5 compared to the 6 month time frame of wave 1 of the the potential ending diagonal? This thing could drag on for another year or more couldn't it, considering the length in time of Wave 1? Or is your drawing just for illustration purposes?

    Also, is it not possible to count it as 1,2,3 complete already and working on wave 4 of the ending diagonal? Your "0" mark did make a new low in the S&P but not in the NYA and Dow back in Feb.

    Anyways thanks, I've learned a lot from you. How do I join the real time chat room?

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    1. I based my projection that we had only completed Primary IV at the February lows, and started Primary V based on the 8-year Fibonacci cycle. So, I am looking for this wave count to wrap up between Oct and Apr.

      Not possible that we have completed wave 3 of the ending diagonal because waves 2's and 4's in diagonals 'must be' zigzags and not flats. The circle-b wave is clearly a flat as the ES even makes a higher high the night before the Brexit. Therefore, it simply may not be part of wave (2). Further, the first wave of a diagonal 'must have' made the new all time high to express it's 'motive' character. (You may see Frost and Prechter on this point.). That gives is the count we are today.

      Send me an email at Elliott_Trader@yahoo.com and I'll provide details on the real time chat room.

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  7. Thanks Joe! Since the technicals are suggesting a bottom Fri or early next week and only 3% off ATH, why have you not talked about the possibility of a 1-2, i-ii count from 1810? There really isn't any damage done to the weekly chart until 2120ish gets taken out. This is where the weekly middle BB lies.

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    1. As above, nested 1-2s are 'possible' but are less likely because of the truncation. Always remember Bollinger Bands are formed by a calculation of moving average and standard deviation FROM price. Therefore BB's are a 'guide' only. They do not determine where price goes. It's the other way around. Price determines how the Bollinger Bands look and move, how wide they are and where the center point is, and Bollinger Bands 'always' lag the price action.

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