Thursday, November 24, 2016

A Wave

Not just any wave, but the "A" wave : the minor A wave - most likely. We had said that if  the DOW passed 19008, then it would numerically invalidate the possibility of a diagonal A wave in the hourly Dow Jones Industrial Average. The Dow did that this holiday shortened week, and formed an impulse count as best as we can tell.

But unlike some market prognosticators - even some various serious Elliott wave types - we did not scream "top tick", nor did we call for a new Primary III bull market. Neither did we post some outlandish new price targets like many gurus. Instead, we advocated for calm, and flexibility. (Check out or post of 11/12/2016 - and look how many more days have had new higher highs.)

So, after considering numerous possibilities this week, this is the count that seems most on track. It is just the Minor A wave as a impulse, rather than as a diagonal.

DJIA - Hourly - Minor A Wave as a Diagonal

This count has already proven itself, and since minute wave iii is longer than minute wave i, then minute wave v can be almost any length - but it is a common target than v = i, and this wave is approaching that level. The A wave may still not be completely done, but it is getting very close.

After this wave wraps up, then there should be a pull-back for a B wave - that realistically can be 23.6 - 78.6% of wave A, followed by a C wave up.

We have to admit because there is a triangle involved - which 'could' be the B wave, itself, then the best alternate would be that Intermediate (3) is completing at this time. But there is no significant evidence, other than the triangle, for that point of view just yet. Still, there is a triangle, and a triangle should precede the last wave up in this series. But, and this is a big but, that triangle is a "running triangle", and running triangles - with their higher (b) waves - are still bullish, and still point to higher market highs at some point.

This "A" wave would be part of Intermediate (3) of the potential larger weekly diagonal we diagrammed in previous posts. And, again, we said we have no preference as to whether this upward wave completes as a diagonal or an impulse. And there is no good solid evidence for either count, yet. The Diagonal would be better supported by a three-wave Intermediate (3), and the impulse would be better supported by a five-wave Intermediate (3). In the overall impulse wave up, this minor A wave would be the minor 1 wave.

So far, the market has been slightly stronger on the upside than we might have expected, but this still can be the "no-pullback" quality of an A wave up. So, once again, we remain flexible and patient and will continue to follow all the rules, and as many of the guidelines as we can.

On a positive note, we were correctly critical of those calling for "top tick" in an effort to sell their newsletters, and/or promote their services, and we hope that helped your perspective to some degree.

Cheers, and have a great holiday!


  1. It's very hard to believe the diagonal when wave ii only retraced 23.6%. This indicates a ton of strength where an ED wave ii should retrace at least 50% indicating a struggle between bulls & bears as market prepares to top. I still think 1-2-I-ii count is most probable.

    1. So, by way of discussion, I can only offer the following technical indicators. The $VIX is now diverging from the SP500. The $VIX has not made a lower all-time-low, in months, as the $SP500 has made these new all time highs, the $CPCE is now 'routinely' trading in it's lower standard deviation band, and the AAII Investors just swung from 23.6% bulls to over 46% bulls. These are technical conditions (especially the VIX) which are historic in nature. And, so, if sentiment and trading measures are getting very stretched right here, what evidence do you offer that we are dead in the middle of a third wave?

      As to the retrace amount of the diagonal, I have addressed this several times before. The diagonal that ended Primary III also did not do the expected 'deep retrace waves'. But, it sure did end the upward movement for months. The retraces from Oct 2014 to May 2015 in the SP500 were confined to ~38.2%. There is no 'rule' that specifies the deep retraces that some people expect in a diagonal (i.e. 62 - 87%) .. just guidelines.

    2. Is the rule that minor 1 of an ED should crest above intermediate 3 is also a guideline? What happens in case of a failed 5thED?

    3. Hi Amit. It depends if one is talking about an ending diagonal fifth wave. If one is, then all of the diagrams in the Frost & Prechter show the E-D having it's first wave above the prior third wave. And, there are comments that each of the sub-waves should be higher than the third wave to "show their motive character". On the other hand, if one has three-waves up before the prior high - how is one to separate what could be a 'Leading' Diagonal from one that is a true 'ending' diagonal? Do you see the distinction? The ending diagonal has it's waves 'over' the prior third wave; the leading diagonal has it's waves 'under' the prior high.

      In the failed fifth of an E-D, the wave (v) is still higher than it's prior wave 3, or III, but does not have to be higher than the prior wave (iii). Usually, they fail just short of the upper trend line.

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    5. Leading diagonal is composed of 5-3-5-3-5 subwaves while Ending diagonal is composed of 3-3-3-3-3 subwaves.So they can be distinguished.

    6. Hi Amit. Not every leading diagonal is 5-3-5-3-5. Please reread the Elliott Wave Principle on this point. Some leading diagonals are 3-3-3-3-3, as well.

  2. thx as always
    can i ask you to know your EW vision on the italian FSTEMIB market?
    duoble thx

    1. Watch out for a possible "running triangle", with a lower (b) wave since June, 2016. Better confirmation would come by trading below 16,000, and if this occurs, it would likely be the fourth wave of the decline since the high. So, a fifth wave down to new lows would be expected. If the highs are exceeded first, do the measurements needed to confirm a Leading Diagonal, instead.

  3. Let's see . . . not the screaming "top tic" and not outlandishly high price targets . . . -- that would seem to leave us with what? -- that's right -- the middle way.
    Nice work Joe. Thx for sharing.