Saturday, October 1, 2016

Stayin' Alive

Like that classic old Bee Gees tune, the Dow's potential for a Contracting Diagonal remained alive on Friday even with all the turmoil over the overseas banking issues. Here's the updated chart as of the close.

Hourly Dow Jones Industrial Average - Potential Contracting Diagonal

The most salient point regarding the count was that the b wave high of wave (b) - expanded flat - was exceeded in a positive development. (Of course, this rules out the opposite wave i at the c wave low of (b) because a wave ii could not have exceeded the start of it's wave i, which it did.)

Still, an even better occurrence would be a new high above minute-i (circle i) on 22-September. So, provided the low at c is not violated, we will be looking for that next week.

Remember, that if we are truly in a (c) wave up of minute-iii (circle iii), then such a (c) wave could occur in the form of either an impulse or a diagonal itself. So, the progress of such a wave could be a simple to count impulse (of which we may have the first four waves now), or it could become an overlapping structure. However, from a timing stand-point, it would be best if the up wave completed in the next few hours because usually (not always) in a contracting diagonal, wave iii is shorter in time than wave i.

If the overseas news settles down a bit, then with Monday being the first trading day of a new month, this often (not always) means there might be new fund inflows from pension funds, 401k's, dividend reinvestment plans, company bonuses, and / or other sources which become available on a monthly basis.

We still must indicate that risk of invalidation is still quite high. There are, indeed, downside possibilities we can see, but with the new wave higher than the previous b wave, they have decreased just slightly at this point in time. So, we'll maintain the count with the current larger trend until it no longer makes sense to do so. As a reminder of where this wave sequence might fit, here is a chart of the two-day S&P 500.

SP500 - 2-day Showing Possible Position of a Leading Diagonal A Wave

So far, the A wave is crawling up the lower trend line, and that is the reason for maintaining the count. If the trend line begins to get violated to the downside, then it would suggest that a second wave (or worse) lower is developing to a deeper location on the chart - certainly well within the realm of possibility, but not required. For now that hasn't happened, so we'll just do our best on a daily basis to keep abreast of things.

Cheers and enjoy the weekend!


  1. Thanks Joe. Reading every post and hoping that, ah, hah, hah, hah we'll be stayin' alive with this latest updated chart. Personally I don't want to say bye, bye Miss American Pie to a dead potential diagonal A count! Thanks again Joe. (Love your titles--can you tell?)