Wednesday, October 5, 2016

I Got Sunshine on A Cloudy Day

Just so you have some confidence, here is an SP500 5-Minute Chart from the live chat room of yesterday and today.

Three Waves Down Yesterday & Five Waves Up Today

Yesterday, during live chat at the end of the day, I said that while there were enough advance / declines for an impulse day down ( 1 : 3), the only way we could count an impulse down was if the market opened down this morning and made a new low. That was for two reasons : wave B (circle B) above was clearly a flat wave, and second waves are not 'usually' flat waves. But in addition, if the low of Elliott Wave Oscillator was (3) of 3, and (5) was (5) of 3 on a divergence, then the late afternoon up wave to the upper channel boundary 'could' have been a fourth wave zigzag up to alternate with the flat - as it did not overlap and the Elliott Wave Oscillator went to zero. But that exactly reverses the typical alternation sequence for an impulse wave - not impossible, but a real watch-out!

That's why I posted last night we need to have the market make a few decisions here. The market decided not to make an impulse down, and instead gapped higher this morning. This left yesterday as a clear A, B, C downward move, and the gap up was clearly not entirely unexpected.

And now today, you can see on the chart above, I counted a clean five-wave up sequence with iii of (3) on the exact high of the EWO, and (3) on a two-bar divergence. There there was a very long barrier triangle, during which the EWO did, indeed, go to within +10% to -40% of the wave (3) high, to make a solid wave (4), followed by a brief, but complete, wave (5) up out of the triangle.

But you can also see that today's high did not eclipse yesterday's high, and so today may only be a five-wave (a) wave up. Please now refer to the chart below, which is the alternate that was presented in writing yesterday.

SP500 4-hrs Difficult to Count an Upward Diagonal because of wave-d

The difficulty in counting an upward diagonal is now the minute-d wave down. It looks quite complex, and the waves in diagonal are supposed to be zigzags. But we just said yesterday's down wave was not a five-wave sequence, so that makes counting the c wave down of a zigzag very very difficult (not impossible). And the zigzag would have truncated at that - which lowers the odds even more.

So, for this reason last night I said we could be in this alternate count of a B wave triangle, which may not be completed yet. The minute-a, minute-b, and minute-c waves (circle-a,b,c) would be the simple legs, and the minute-d wave (circle-d) would be the complex leg. Then, if it is truly a triangle, (and remember all triangles must prove themselves), wave minute-e would need another up leg to unfold properly. In the mean time, minuet (b) wave down is likely underway.

IF the triangle completes properly, and there is a break below the minute-d (circle-d) wave, then a more extensive C wave of Intermediate (2) might get underway.

At this point, only a high above minute-c (circle-c) before a low below minute-d (circle-d) would be convincing that an upward diagonal for a minor A wave has re-established itself. As I have said before many times, the risk of invalidation has gone up. It takes many more points now to validate or invalidate a wave than it did before. I make no apologies. It's the nature of the game.

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