Friday, October 21, 2016

Good Grief!

I know that Charlie Brown of Peanuts fame would probably use an expression like this to describe what is currently going on. There are a number of you who are (to say the very least) skeptical of diagonals and triangles in waves. That's why I'm posting this chart in near real time to show you the counts that have been presented in live chat, and some of the predictions that have resulted.

First, over to the left of the five-minute S&P 500 chart, we even blogged on here that we had found an ending contracting diagonal on the five minute chart. The contracting ending diagonal is perfect in every aspect. Wave (5) is shorter than wave (3). Wave (3) is shorter than wave (1). Wave (4) is shorter than wave (2) and overlaps wave (1). Each wave is a zigzag, and there is the characteristic throw-over of the wave (1)-to-(3) trend line by wave (5). Try to study this formation. You will learn a lot from it.

SP500 5-Minute Chart : Three Diagonals
So, on Wednesday the 19th Oct, that diagonal led me to predict in live chat that "the origin of the diagonal, the point noted as 0 should be exceeded lower no later than noon on 20th Oct." It was in the opening hour of Thursday's trade. Then, the wave was retraced to a very large degree, and, rather than forming a parallel, looked like to me to be another diagonal. But this one would be an expanding diagonal of the 5:3:5:3:5 variety. And, it too, formed to perfection in every detail. You see, these two diagonals taken together can represent what some see as either "Butterfly or Gartley" patterns when the market is looked at through those lenses.

After the expanding diagonal formed at (5), with wave (5) longer than wave (3), wave (3) longer than wave (1), wave (4) longer than wave (2), and wave (4) overlapping wave (1), then a deep retrace was likely. Once we had gotten the five waves up to the (A) wave, then I clearly stated, "Five waves up are detected. Another pop is probable". And, shortly thereafter, the strong (C) wave up began, and retraced right to the upper descending trend line of the diagonal and the 78.6% deep retrace level.

So, next, after having drawn in the channel for the upward zigzag wave sequence, when the lower upper rising channel line was broken and the red triangle (denoting the fractal at that location) was exceeded lower, then I resumed the downward count. This is what led me to conclude in last night's blog post that, referring to the SP500 30-minute contracting diagonal, lower, "At this very moment there is no reason to abandon the count."

Further, at the end of the day yesterday, I started yet another diagonal downward due to the again overlapping waves, and the three-wave sequences, and look how this diagonal completed in perfect form this morning!

Yes! You don't often see this. Yes! It is rare. But it is guaranteed you won't see it if your Elliotician is not looking for it, or if you, yourself, are not disposed to look for triangles and / or their cousins, the diagonal, where they can be.

The point of this post is not to toot our horn. One purpose of it is to show you how diagonals and triangles have such exacting internal requirements that they can help the Elliott analyst set clear and unequivocal  invalidation points - just as we have in the last many posts. Another purpose is to help "shake loose" the Elliott Wave cob-webs that some people have - which have become so thick as to literally put blinders on them when it comes to wave counting. But, yet another purpose, is precisely to show how waves can form. After the initial expanding diagonal which we called the (a) wave down in last night's post, there is now yet another expanding diagonal, lower, which is probably the first wave of the (c) wave of minute iii (circle iii). And, still, the diagonal provides a very clear invalidation point for the downward movement in that the (C) wave high, above, at 2146, should not be exceeded higher if the count is to be correct: that is the high of the (b) wave on the SP500 30-minute chart.


  1. we are forming a LD or ED (expanding). all conditions met...5th to come on sunday?

  2. sorry the correction 4th was longer than 2 from yesterday. 3 was larger 1....lets see if we get 5th on monday

  3. Very nice ET!. Step by step, the puzzle is refilled.

  4. Looking at the VIX index, investors are very complacent considering October isn't over yet.