Friday, October 28, 2016

Before the Bell: Three More Waves Up Yesterday

Because yesterday's higher futures opening was met with selling immediately upon the cash open, we could count only three more waves up from the 25th Oct low, although the wave we have marked as 'c' did itself count as five waves. Within the first hour, the opening gap closed, and selling essentially continued into the close. Based solely on the waves obtained, we posited this count during live chat on the SP500 15-minute chart, and it supposes that we are in a further A wave down within the daily triangle.

SP500 15-Minute Chart Only Three Waves up to (2)

The initial hour's trading did not exceed the low of the c wave on 25th Oct, so it most likely counts as an 'a' wave lower. That was followed by a three-wave rise to the 'b' wave up. Then, there are three more waves down that do travel lower than the green-dotted parallel between them. We suspect that to be a third wave lower of another 'c' wave lower which should break the low of Tuesday. If it does, even marginally, then we may have the third wave down, wave (3) of a contracting leading diagonal.

It is difficult to see what other pattern would have so many three-wave sequences. We know the futures traveled down to 2116 in the after hours, about -8 points from where they closed, and are now trading higher than where they closed. Cash would need to make a print of 2131.58 or lower to validate this pattern but remember that overall wave (3) would have to remain shorter than wave (1). The futures not only broke the equivalent low from 25th Oct, but also from 21st Oct, already!

If a marginal lower low is made, one might then look for the market to whip around higher again, and if a contracting diagonal is being made, then a potential wave (4) should be shorter than wave (2). After wave (4) - and we don't know the length - we have just sketched in some tentative trend lines to show the potential, then a wave (5) downward could finish the pattern - if it, too, occurs in three waves and makes a lower low. Remember, in Leading Diagonals the fifth wave should not fail.

Again, if these five waves occur this would be just an overall 'A' wave of the next zigzag in the daily triangle, the minute-d wave lower. The objective would be to get price down to the flat barrier on the daily chart - near 2115. Any movement above the c wave high of wave (2) would definitely invalidate the pattern.


  1. Replies
    1. Welcome Mark & thanks for saying.

    2. Just to let you know (time is 12:45), I made another fantastic trade based on your diagonal suggestion.

      Thanks so much, Joe!

  2. do you mind showing a daily wave count? Im a little confused by the triagnle idea