Monday, October 24, 2016

A Tale of Two Triangles

As we had noted over the weekend, we lowered our wave-counting invalidation level to 2144.50 cash. And when that was exceeded (in the overnight by the equivalent in the futures), it told us that the small pattern on the 5-minute chart that we thought was, perhaps, an ending expanding diagonal was, in fact, somehow part of a larger pattern.

We note that volume was extremely light today, and the daily stochastic is still traveling sideways. So, that still suggests a triangle of some type in progress. There are now actually two larger potential triangles - the first one of which we have referred to before.

Daily ES - Potential (e) wave of B Wave of Intermediate (2)

This chart assumes that Intermediate wave (1) completed at the August high, and the triangle is the Minor B wave of Intermediate wave (2), lower. The objective of this count would still be to get the S&P500 cash index to overlap the 2111 high made in April of this year. This count is still 'plausible'.

So, while we note the ES overlaps the June, 2016 pre-Brexit waves at the arrows shown. We note that the ES does not yet overlap the red line and wave i, shown in the above chart. This brings about the possible idea that maybe we are still in the same wave, upward. This possibility is shown on the chart below.

Daily ES - Potential ivth wave of C of Intermediate (1)

Since there is technically no overlap at i in the S&P500, then it is possible that all of this sideways mess is still a fourth wave of C of Intermediate (1), but if so, not as likely in the Dow Jones Industrial Average. The DOW does indeed overlap at the equivalent of wave i, and so this latter count takes a back seat until or unless it can be proven. The DOW's overlap is an intra-day one and not a closing one, and on very rare occasions the Elliott Wave Principle, by Frost & Prechter says that is permissible. Another reason this count takes a back seat is that it does not have the "right look"  for one impulse wave.

Nothing either clearly rules out (1), (2), 1, 2 higher. This could be a minor wave 2, on the way to a minor wave 3 if the election is decided quickly and cleanly. Let me add that chart below - just so the possibility is clear.

Daily ES - Minor Wave 2 of Intermediate (3) Possibility

Sorry I can't be more help just yet. Apparently, more price movement is simply needed. Maybe that is why the volume is so light. Often times, the w-x-y minor 2 count precedes a strong third wave higher the way it is diagrammed in the Elliott Wave Principle.

In any event, the risk of whipsaws remains elevated, as we had noted in previous posts. Both upward and downward movement are occurring only grudgingly.


  1. Thanks Joe! Appreciate your work.

  2. I thought wave 2's can never be a triangle?

    1. Hi Todd. You are correct in that the Elliott Wave Principle says that waves 2 can never be 'entirely' a triangle. However, the book also describes many corrective sequences where a triangle is 'part' of wave 2. This is allowed. One example would be where wave 2 is an A, B, C, then the B portion can be a triangle. In the case I am showing, the count is W-X-Y, where only the Y portion is a triangle. I encourage you to review this section in the Elliott Wave Principle by Frost and Prechter.

  3. Todd, of ours an ABC correction the B wave can be, I believe